Tip from the Plumber

What do you do when your kitchen sinks runs slowly - and there is back-up when you run the garbage disposal?

My never-fail solution is CALL THE PLUMBER.

My plumber (the world's finest) is Don Williams, and after he unclogged the sink today using mysterious plumber tools, he gave me this tip:

Fill your garbage disposal with ice cubes - maybe enough to fill a couple of tall glasses - and run it til all the ice is crushed up and washed away (okay - turn the water on too). It cleans out the disposal, eliminates any built-up odors, and will make the disposal last longer.

You heard it here: for good garbage disposal health, run your disposal with ice cubes once a month. If you need to CALL THE PLUMBER, you will get terrific service, quality work, great attitude and fair price with Don Williams - 623.806.0593.

Credit and What You Can Do About It

I'm about the farthest thing from a credit expert that you could find. So when I got a chance to learn more last week, I took a class - and am glad I did. Lenders know about credit and how to improve it - and the class instructor is a good resource. His name is Elvis Saloum and he is with Arizona Wholesale Mortgage. His phone is 480.797.1560 and his email is Elvis@AZWM.com. These notes may help me to remember - and if they can help you, good.

The three credit bureaus have a different range of scoring.

Experion - 330 to 850
TransUnion - 400 to 925
Equifax - 300 to 850

Don't ask me why - I didn't get that. But generally speaking, an 850 credit score is higher than you'll ever need and a 720 score is outstanding. A 680 score isn't bad, but borrowing money with a 680 score is likely to cost you more than a score that is higher. A 620 score is not good.

70% of credit reports contain errors. Depending on your score and what you need to do, getting rid of errors on your credit reports could be a smart thing to do.

A "hard" pull requires your social security number - and it will affect your credit score. A "soft" pull - one that does NOT require your social security number - does not.

There are five components that make up a credit score - and five things that you can do to increase your score by 50 points. Your credit history is 35% of your score, debt ratio is 30%, 15% is how long you've had credit (the longer, the better), the type of credit you have makes up 10% of your score (you want four to eight trade lines for 24 months or more), and the other 10% is credit inquiries.

You can improve your score by paying off your past due accounts, getting rid of late payments, increasing your credit limits, having late payments removed (in writing) by your creditors and - by NOT closing old accounts. Use them once every six months instead of removing them.

Derogatories stay on your credit report for seven years - for example, late payments, charge offs, student loans, foreclosures, judgments, bankruptcy, paid tax liens. Unpaid tax liens will show up for a minimum of 15 years.

Foreclosures and short sales may represent 85-105 points on a 680 credit score and 140-160 points on a 720 credit score.

A good lender knows all this stuff and can help you wade through it.

Buying Real Property After Bankruptcy, Foreclosure or Short Sale

At a class a couple of days ago, Elvis Saloum of Arizona Wholesale Mortgage talked about lender guidelines as to when a buyer may expect to qualify for a loan to buy real property again after going through a short sale, a foreclosure or a bankruptcy. I always refer my buyer clients to a lender - so they know for certain if they qualify for a purchase and for how much - but these notes give me some idea of what they may expect to hear, generally speaking. Individual circumstances will vary.

Conventional Loan:
4 years after bankruptcy (two years, with extenuating circumstances)
7 years after foreclosure (three years, with extenuating circumstance, with 10% down)
2 years after short sale with 20% down

FHA Loan:
2 years after bankruptcy (one year, with extenuating circumstances)
3 years after foreclosure
3 years after short sale - unless no mortgage payments late in past 12 months and buying in different geographic location

VA Loan:
2 years after bankruptcy (one year, with extenuating circumstances)
3 years after foreclosure
2 years after short sale

Again, individual circumstances vary. The better the credit scores, the better a buyer's ability to get back into the real estate market. I'm glad I work with good lenders who are willing to work with buyers to help improve their credit scores.

Tax Consequences of a Short Sale

I attended a good class yesterday on the tax consequences of a short sale. One of the biggest concerns a seller has in a short sale is tax liability on the amount of debt that the lender forgives. According to Marcos Goodman, the CPA who taught the class, here's generally the way it works:

Let's say the homeowner owes $250K on a property that sells for $150K. The $100K difference represents a cancellation of debt, or "phantom income" to the seller.

The first question to ask is, is the property a primary residence or an investment property?

If it is a primary residence, the Mortgage Relief Act allows for up to $2 million in debt forgiveness for purchase money and for refinance. The lender issues a 1099c to the seller, and because of the Mortgage Relief Act, no tax is owed on the phantom income.

If the property is an investment property, i.e. a rental, it will NOT qualify for the Mortgage Relief Act. The seller still gets a 1099c - that's the bad news. The good news is that the seller can show the loss on his taxes so he will net zero.

The second question is, does the debt represent non-purchase money (meaning that the seller took money out of the house to buy a boat, take a vacation, pay bills etc.) That's the big tax gulp in that non-purchase money is NOT covered by the Mortgage Relief Act.

When that sounds like your situation, a consultation with a CPA is definitely time and money well spent.

Near St Helen's Catholic Church

I just listed an especially nice Glendale home near 59th Av and Cactus - not too big, not too small, very good condition and right across the street from St Helen's Catholic Church and by Desert Palms Elementary School. It's not all that far from Ironwood High School - and of course that's not all that far from Glendale Community College.

Affordable - I'm guessing that someone making about $15/hr could qualify for this home. So - whether purchased by a first-time buyer, a retiree, or an investor - this is great value.

Drive by and see: 5515 W Cholla St, Glendale - and let me know what you think.

Writer's Block

I haven't blogged for a long time and promised myself - after returning from Mega Agent Camp in Austin last week - that I would. Why? Because blogging is a good way to share thoughts that might turn out to be useful to a blog reader.

I just signed two dozen letters that I've written to homeowners in Glendale and Peoria who recently received foreclosure notices. I'm asking each one of them to give some thought to selling their houses, avoiding foreclosure.

Is short sale short? No - it usually takes weeks or months.

Is it easy for the homeowner? Well, a foreclosure is easier - you simply put your blinders on and ignore it until your home is sold at auction. The damage to your credit from a foreclosure is likely to follow you around for about four years - more or less.

Whether a short sale is easy or not depends on the level of cooperation of the homeowner and the lender. The short sale agent works hard - collecting information from the homeowner relating to the hardship, marketing for a qualified buyer, communicating the offer to the seller's lender, keeping the buyer's agent informed - and at the end of a successful short sale, the homeowner has avoided foreclosure.

I'm planning a Short Sale Shop Talk on Monday evenings, starting soon.