Days, First Time Home Buyers are Primed to Cash
By Ilyce R. Glink with Samuel J. Tamkin
Reprinted from the Washington Post
Saturday, March 21, 2009; F05
In the nearly 16 years that I've been writing
this column, I've never seen a better market in
which to be a first-time home buyer.
The rising tide of foreclosures has pushed down
home prices significantly over the past 18 months.
Homes, relative to income, are about at the historic
norm, which means they're more affordable than
they've been in at least a decade.
Beyond that, if you buy a foreclosed property,
you might wind up spending even less, as lenders
struggle to process all of the foreclosures and
short sales that are piling up. (If there were
no more foreclosures in Florida, it would take
the courts nearly two years to process all of
the foreclosures on the docket today.)
Not only have homes come down in price significantly,
but 30-year fixed-rate loans are at about 5 percent.
Some first-time buyers are getting 15-year rates
at 4.5 percent or lower. These are historically
low interest rates that will seem downright cheap
if rates rise above 7 percent, which they will
probably do several years from now.
Spending less to finance a property means you
can get more for your money or save more for retirement
or other purposes. With interest rates so low
and home prices falling, homeownership becomes
affordable to many first-time home buyers.
Also, first-time home buyers (defined as those
who have never owned a home or have not owned
a home in the past three years) who close on a
home purchase by Dec. 1 can get up to an $8,000
tax credit on their 2009 income tax return. If
you bought a house after Jan. 1, you can file
for the credit on your 2008 tax return.
This year, about 4 million people will buy a
new or existing home. If you want to make sure
the house you buy this year is a smart financial
move, follow these quick tips:
-- Get preapproved for your loan before looking
for a house. That means the lender has to pull
a copy of your credit history and score, you have
to apply for the loan, and the lender has to approve
your application. Make sure you shop around for
the best lender and loan before putting in an
-- Once you know what you can spend, find the
right neighborhood for the next seven to 10 years.
Over that time, you've got a good chance of at
least breaking even on the sale, plus you'll have
built up a decent amount of equity by paying down
your mortgage each month. Remember, it'll cost
you about 10 percent of the sales price to sell
-- Don't go for flash -- buy what you need. You
can always add granite countertops to a kitchen.
It's a lot harder to buy the size house you need
in your school district of choice. So, buy something
a little faded and dated and upgrade over time
as your budget allows.
-- Make sure you have cash in reserve. Houses
always need something, so when you're calculating
your budget, make sure you allow some extra cash
for upkeep and maintenance.
-- Buy a home that you can afford and suits your
needs now and for the long term. In the past I
have written about overbuying -- that is, buying
a bigger and better house than you need. Good
planning in the purchase of your home should go
hand in hand with good financial planning for
Q: My now-ex-spouse and I purchased a property
before we were married, but since the plans were
to get married, I added her to the title. She
did not put any money toward it. Things didn't
work out between us, and she demanded that I pay
her to quitclaim the property back to me.
I went after her using my attorney and the courts.
She finally just sent in the quitclaim, and this
deed has also been recorded in the county's clerk
office, after which they sent me the original
Is there anything else I need to do to protect
myself? Once the quitclaim deed is recorded, does
the recorders' office make updates to the title
of the property showing only my name? And if so,
how long does it take for them to complete the
update? Will they mail a copy of the new deed
to me, or is the filing notice all the paperwork
I'm wondering if I can terminate my lawyer's
services or if I have to wait for any other updates.
A: It was a mistake to retitle your condo before
you were married. You might not have had to change
the title to the property at all because it was
an asset you purchased prior to your marriage.
You could have simply changed your will to reflect
your wishes that your wife inherit it.
To your question: Once the quitclaim deed has
been recorded, the title to the property should
effectively be in your name. Unlike with car titles,
you won't get a document showing you holding title
to the home.
You can go to the recorder of deeds office and
check the records directly. You will find a long
chain of documents that will trace ownership of
your home, including the document that transferred
title from your seller to you and the deed that
placed your ex-spouse on the title. Many offices
also make the documents available online.
If you got divorced, you should be done with
any legal issues relating to your ex-spouse. One
issue that might remain relates to any judgments
or tax liens that may have affected your ex-spouse.
The act of transferring title back to you by quitclaim
deed or other means would not terminate any third-party
creditor rights against the property.
If your ex-spouse had no liens against her when
she quitclaimed the property back to you, you
received all that she had. In that case, you most
likely should be fine. If you need more information,
talk to a real estate attorney.
Q: My credit score is 639, and I am a government
retiree who met retirement qualifications at 55.
My income is $40,000 annually, and I would like
to purchase a condominium because I don't want
to worry about yard upkeep and I live alone. Should
I contact a developer or the Federal Housing Administration
to inquire about purchasing a property?
A: Neither. You need to figure out what neighborhood
you want to live in and then find a great real
estate agent who understands what is happening
with home values there.
The agent you choose to work with should be a
great listener and work with people who are around
your age and earn what you do. Your agent should
be your eyes and ears in the neighborhood, so
look for someone who has been working in your
neighborhood of choice for some time and is well
positioned to help you find a great deal.
Once you find a great agent, you'll want to put
together other parts of your home-buying team,
including a good mortgage lender. Talk to a loan
officer at a credit union (if you belong to one
or can join one) because credit unions typically
offer great deals on mortgages and car loans.
You should also talk to a national lender and
a local mortgage broker. By shopping around, you
should get the best deal available.
Before you go out looking for a condominium to
buy, you should understand that your credit score
is relatively low. In past years, having a low
credit score may not have been an obstacle to
purchasing a home, but nowadays your score may
mean you have to pay more to close the loan and
pay a higher interest rate on it.
You might want to try to figure out why your
credit score is so low and work to improve it.
Once the score is higher, you might find that
the costs of owning will be lower.
Start by checking your credit report at http://www.annualcreditreport.com
and trying to figure out why your credit score
is low. If you have too much debt, too many outstanding
bills, missed payments, collection issues or bills
that you are paying over time, you should try
to clean some of these issues up.
You can also sit down with a good mortgage lender
and work through some of your credit issues. If
you know what your issues are, you might be able
to improve your score over six to nine months
by paying off debts or paying down credit card
Once you know how much you can spend on the condominium
and what it will cost to finance the property,
and once you figure out what neighborhood you
want to live in and find the right agent, you'll
be ready to start looking for a home to buy.
Q: My friend and I own a home together as joint
tenants with rights of survivorship. If he should
die before me, I realize, the home becomes mine.
But what happens to the interior furnishings?
Do his three children have a right to come and
remove their father's half of the furniture?
A: The furniture is not part of the house. It
is considered to be the home's "contents"
or "personal property" (as opposed to
real property). Personal property gets distributed
to heirs in the manner provided by state law or
as designated by a will. If your friend has a
will, he can designate what items of personal
property will be yours and what items of personal
property will go to his children. If there is
no will, state law may provide that all of his
personal property goes to his kids.
While it would not legally binding, your friend
can also write a letter to his children asking
them to respect his wishes and allow you to keep
certain items. In the case of sentimental items,
that same letter may ask you to return certain
items when you move from the home, when you no
longer need them or upon your death.
If you'd want to keep the furniture, you and
your friend could write out an agreement that
allows you to either keep the furniture outright
or buy his share in the furnishings from his children.
If you and your friend don't have a written agreement
when he dies, you can ask your friend's children
to allow you to make them an offer to keep certain
pieces. But if anything seems valuable or memorable
to them, be prepared for them to turn you down.
There are quite a number of ways to handle your
situation, but only a properly drafted will can
achieve your friend's and your wishes.
Q: My mother put my brothers and me on the title
to two properties in two states. My mother's lawyer
recently told her she has no claim to the properties
-- they belong to the three of us.
One brother is living in one of the properties,
but my other brother and I did not agree to that.
We want to sell the properties but are certain
that he will not agree to this.
What are our rights as far as selling the property
or at least being able to use it? Can we force
him to sell or at least buy us out?
A: If you and your one brother wish to sell the
property, your first course of action would be
to negotiate a solution with the other brother.
If you can't do that, you can bring a lawsuit
to force him to sell. You would need to hire an
attorney with experience in partition suits --
that is, suits to partition properties and force
their sale. You effectively go to court and ask
the judge to settle the dispute for you. If the
judge sees that no resolution is possible, the
parties can request that the judge order the sale
of the property.
A partition suit, as with any litigation, will
cost time and money. During the litigation, you
can also force your brother to pay his share of
expenses for the home that he has failed to pay
over the years. His share of the property expenses
can be deducted from the total he is due before
it is paid.
A second alternative is to swap properties among
the three of you. Since there are two properties
involved, you might be able to trade his interest
in the property he does not live in for his interest
in the property he does live in. If the two properties
are roughly equal, this might not work unless
you attach some additional money to the deal.
Your question really points to the dangers of
parents putting property into their children's
hands before they die. Your mother was probably
trying to either minimize estate taxes or protect
these properties from having to be sold to pay
a nursing home bill down the line.
Please talk to a real estate attorney for other
options and an explanation of how you would proceed
legally, if you choose that direction.
Q: I own a condominium worth $110,000 to $119,000,
but I owe $125,000 on it. I'm the only person
on the loan, but the property is deeded to my
ex-wife and me as joint tenants with rights of
survivorship. I want to take possession of the
property solely so that I can sell it and clear
it off my credit history.
Unfortunately, I am unable to move ahead with
this plan because my ex-wife is attached to the
property and will not agree to let me sell it.
I will gladly give her sole possession of the
property if she wants to refinance it into her
name but she refuses.
She doesn't reside in the property. It is being
rented below market value to a friend of hers.
Is it possible to get a court order to have her
refinance the condo into her name only? And if
she is unable to refinance the property for any
reason within a certain amount of time, does she
sacrifice her right to the deed?
A: Talk to your divorce attorney. The issue of
this property should have been settled in your
divorce agreement. If your ex-wife was given half
of the property as part of the settlement, then
you will have to buy her out or risk letting the
property fall into foreclosure, hurting your credit
score and hers.
If the tenant is paying a below-market rent for
the property, you might insist that your ex-wife
make up the difference or rent the property out
to a tenant who will pay market rent. If she won't
cooperate, your only option may be to get the
lawyers involved again.
However, you might want to convince your ex-wife
that paying the lawyers money that could otherwise
go to paying for the expenses of the home would
not be the best course of action. It's in both
of your interests to settle this amicably. Litigation
should be your last resort.
Q: My mother passed away and left a house with
a mortgage. The house has not sold, and the value
has declined because of foreclosures in the area.
The bank is pursuing foreclosure and naming my
mother's heirs as defendants to terminate our
interests in the property.
We have few resources, and my mother's estate
was exhausted by the cost of repairing and maintaining
the property while trying to sell it.
Is it more cost effective to go through foreclosure
and add a statement to our credit reports explaining
that the mortgage was not ours, or should we pursue
a deed in lieu of foreclosure?
A: The bank's action is against the bank's borrower:
your late mother, not you. If your mother was
the only borrower on the original loan to the
bank, you and your siblings or other heirs should
not be personally responsible for the loan. Your
mom's estate is responsible for repaying the mortgage.
If the estate has insufficient funds to pay off
the lender, the lender has the ability and right
to foreclose on the home. But that foreclosure
should not affect your credit history or the credit
histories of the other heirs.
The bank shouldn't have your Social Security
number or any documents from you obligating any
of you to repay the loan. In that case, the loss
on the loan is taken by the bank and reported
against the borrower -- your mom.
If you decide to pursue a deed in lieu of foreclosure,
you and the other heirs would be relinquishing
any right to the home. But that documentation
should not have anything to do with the original
debt taken out by your mother.
You and the other heirs shouldn't be penalized
by the current lender when you are placed in a
position of owning a property you did not buy
and for a loan you did not enter into. While you
tried to keep up with the expenses of the home,
if you found that it was too much and then couldn't
sell it and failed to make the loan payments,
the lender remedy is to foreclose on the property.
For more details, and to make sure you are protected
in any dealings with the bank, you may wish to
speak to a real estate attorney.
Ilyce R. Glink is an author and nationally syndicated
columnist. Her latest book is "100 Questions
Every First-Time Home Buyer Should Ask."
Samuel J. Tamkin is a real estate lawyer in Chicago.
If you have questions for them, write Real Estate
Matters Syndicate, P.O. Box 366, Glencoe, Ill.
60022, or contact them through Glink's Web sites,
www.thinkglink.com and www.expertrealestatetips.net.