Bank of America’s Last Resort – Become a Landlord

The Bank of America has announced a new program to address the great number of homeowners facing difficulaties with their mortgage.  Instead of proceeding with foreclosure they are offering to convert the mortgage into a lease.

I can see that this would save the bank the significant expense of processing the foreclosure, plus the extra time in the foreclosure notification process, lost payments, added expense of maintenance, insurance and taxes during the holding period, legal expenses.

It would offer an alternative to the borrower-owner under financial pressures – perhaps, what would be the rent in relation to the current mortgage payment?  But can this help in the long run?  How will the bank restructure the rent payments to make it easier for the homeowner to pay rent than to make mortgage payments?

And is the bank ready to pick up all the maintenance and ownership expenses?  I wonder if Bank of America realizes what this is really going to require?

In its new role as landlord wouldn’t the bank then still pick up the taxes, insurance and other expenses as the landlord?  Management can be a great expense if you are not set up for it.  Or the management fee for someone else to do it properly.

What do you think other banks will do?   I expect they will watch with great interest as BoA conducts this experiment.  Do the Banks really want to become landlords?

Why doesn’t BoA actively solicit investors and property managers who do this business, or who can more cheaply take the homes off their hands?

It will be interesting to see if other banks move in this direction.  It was surprising to hear that the government-sponsored entities were going this direction.  They aer going to sell their homes on Owner Financing, simiklar to Lease-Purchase or Rent-to-Own.  But a commercial venture like Bank of America?  Very interesting.

The Boston Herald reports comments by David Berenbaum, chief program officer for the National Community Reinvestment Coalition.  In light of his background in this nonprofit umbrella group, Berenbaum called mortgage-to-lease “a very compelling idea,” but only if the lender “has exhausted every other option” to keep people in their houses.

What do you think about this?

Texas Home Strategies assists homeowners and sellers to explore options open to them and to assist with difficult decisions.  Free consultation.  682-325-8439

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How Quickly can you sell your home?

New Job, can’t move because you can’t sell!  Can you wait 9-12 months to sell?  Pay two mortgages?  Can you get approved for a second?

What if you had a new job offer in another town?  You can’t pass up a job offer these days?  But how can you buy a new house till you sell your old?

In March 2011 Real Estate Radio reported that 2% of US unemployment is people who have a job offer but cannot move because they can’t sell their house!

The time on the market to sell is getting shorter in some areas of the Metroplex, but in some areas and some properties, homes on the Multiple Listing Service (MLS) are still commonly listed for 9-12 months before selling to the end-buyer who will live in your house.  Houses that are advertised For Sale By Owner, without the benefit of broader advertising, take even longer in most cases and often do not sell.


What if your current house needs significant cleanup or repairs to bring it up to current market standards for a current buyer?  Due to the depressed economy for the last three to four years, many owners have been unable to perform normal maintenance on their homes.

Over the last two years and more, the long droughts and flooding rains in between have caused unusual damage to walls and foundations in North Texas.  Harsher winters and hotter summers take their toll.

This makes it hard to sell a home to an owner-occupant.  Some buyers will want to save money by doing fix-up themselves.  But they often need the major things, like foundation repair, to be done before they will buy.  How can a distressed owner do this?

There are further hidden costs people don’t think of in trying to sell a house through traditional channels.  These days multi-channel marketing, which most realtors don’t do or won’t do, is needed to get your house before buyers.

We can explore creative strategies to help meet your needs.  We share market information.  We work flexibly with homeowners to meet the need or help you find a way to deal with the problem.  Our consultations are free.

Texas Home Strategies assists homeowners and sellers to explore options open to them and to assist with difficult decisions.  Free consultation.  How can we help you?


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Texas Foreclosures

Commonly the term foreclosure refers to a lender taking back a home on which loan payments have fallen in arrears.  But there are other reasons why the bank or various other parties may have a claim on the house and take steps to foreclose.  Even an HOA can foreclose over the comparatively minimal dues owed!

The most common types of foreclosure are bank or lender foreclosures and tax foreclosure.  Again, note that there is considerable difference from state to state.  Laws and procedures for foreclosures vary from state to state.  Time periods and processes can vary considerably.

No Redemption

In Texas there is no redemption for a foreclosed house. The foreclosure notice period before auction is 21 days, after the actual foreclosure notice has been sent to the homeowner-borrower.  initial period for notice of default.  There is usually a period before this after an initial Notice of Default is sent, after one or more payments are late.

Foreclosure auctions in Texas are held once a month, always the 1st Tuesday in the month in every country at the same time.  The foreclosure can be stopped at any moment up to the actual time of that particular property is announced AT THE AUCTION and bidding starts.  This can happen if the owner can come up with back payments and get the loan reinstated with the bank before the house is auctioned.

Stopping a Foreclosure

In reality, the wheels of officialdom at banks usually grind much more slowly, and usually it is a whole different office or section of the bank that is handling the foreclosure/auction process and the loan collection reinstatement process.  Some services an handle this, but even 24 hours is a very short notice to accomplish such a task.

On one occasions, I had put in an offer on a preforeclosure, and was awaiting reply from the bank.  One Tuesday morning, my realtor got a call from the seller’s realtor informing us that the house was going to be auctioned that morning!  And I already had 4 buyers interested in it!

Tax Foreclosure

If the house is foreclosed due to taxes, there is a redemption period.  A tax deed sale does indeed transfer a clear title to the auction buyer, but there is a 6-month redemption period.  If this is your homestead, the redemption period is 24 months.

But there is a statutory 25% premium required for the redemption, that is, the redeemer must pay back the costs to the tax lien purchaser plus 25% interest.  Base costs include any fix-up done in the interim.  After 12 months the interest rises to 50%.


If your house did not sell at the June 1 auction, it is retained by the first lien holder, and could go to public sale, listed with an agent (as Real Estate Owned, or REO).  You as the previous owner would have a chance to buy the house, but this would be a new purchase, and other funding or cash would be required.

In an REO, technically a short sale might be involved, in that the purchase price could be lower than the remaining mortgage.  But I would not expect the bank, at any rate, to sell an REO to the previous owner for less than that previous borrower had in the original mortgage.

Generally the term REO (Real Estate Owned) is used if the bank has actually taken the property back and holds it now in their name.  Advertised properties on the MLS will be REO.

Short Sale or REO

The short sale process is often so onerous that some investors actually prefer to offer only on REOs.  It is likely that in the case of upside-down mortgages (where the market value has fallen below the amount of the original loan), the asking price will be below the mortgage amount.  In Texas, the term “short sale” is not used commonly for the negotiation of REOs, but I have found some in other states using the term this way.

But the same principle is involved if the final price is less than the mortgage held by the bank.  If a house is upside down, it is highly unlikely that the bank can get its full amount back the full amount of the loan plus all the extra expenses it has incurred to foreclose and put the house on the market.

First posted in a discussion on 11 June 2010

Developed for Home Strategies Blog 7 February 2012

Texas Home Strategies assists homeowners and sellers to explore options open to them and to assist with difficult decisions.  Free consultation.  How can we help you?


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Credit Scores and Owner Financing

Experian, one of the Credit Bureaus, has an interesting article in their “Credit Education” section.  They focus on the importance of your Credit Score, and mention credit repair approaches where errors occur.

Experian mentions correcting your history.  The writer says most problems are in errors in reporting or posting.  They fail to mention that you can CHANGE the character of your history and improve your credit score by changing your kind of activity.

Experian offer no help here in taking control of your credit score.

Further, a primary factor missing by design in the Credit Score system is your integrity and conscientiousness in handling cash.  This is a core flaw in the system.  You can have millions of dollars, but fail to qualify for a conventional home loan.

The Credit Score system is based on debt!  Your financial ability and responsibility are not even in focus.  What the Credit Bureaus report on is your ability to PAY DEBTS.  NOT your ability to PAY BILLS and OBLIGATIONS!  There is an important difference here.

So people living on a cash economy are shut out, punished, by this Credit Score system.  They may not not trust banks.  They may pay all their bills in cash.  They will have a low Credit Score or may not even be in the system.  When applying for bank credit all the banks know is the Credit system.  If you are not in the system, you don’t qualify.

In this case they need to look for alternative channels to home purchasing.  A very popular one, well-established in custom and law, is Owner Financing, also called Seller Financing.

In this method, you make a down payment in cash to the owner, then make payment to the owner, like you would a bank.  The owner can sell the house much quicker, since banks may take 3 months or more to approve a loan.

Building Credit
And building your credit to the level of qualifying can often be accomplished in a short term, usually 6-12 months.  The interest rate for Owner Financing is usually higher.

But you are taking this approach for the short term, while improving your credit.  Then when you qualify to refinance, you can get a lower rate than for an initial loan to buy a home.  So over the long run you will save considerably.

To qualify for an Owner finance deal, the buyer can demonstrate financial reliability in various ways.  The owner who is financing will, of course, need personal identification information and employment information, to provide a picture of the overall financial status.

Some companies provide reporting and monitoring services for Owner Financing aimed at establishing a credit record or improving an existing credit score, and let you know when you have reached the level needed to Refinance your home.

Lower Interest
A refinance loan is usually lower interest than a conventional loan, so this offers you an additional advantage. When you qualify, your new Refi loan will pay off the Owner Finance loan, which is usually at a higher interest rate, and you will be in a firm credit-worthy position with your new low-interest Refinance home loan!

So watch for house ads that state “Owner Financing Available” or “Owner will Finance.”  You see these more and more, as people want to sell their houses now instead of waiting.

Texas Home Strategies assists homeowners and sellers to explore options open to them and to assist with difficult decisions.  Free consultation.  How can we help you?

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Real Estate Strategies in a Problem Economy

How can you sell your home in this Buyer’s Market?  So many houses on the market, so many options.  A Buyer can be choosy, and expectations can be high.  How will you meet those expectations ?  How will you compete with all those other houses down the street and in the next Addition?

These are times for creative strategies.  The old system is not sufficient.  A few years ago, you could list your house and get several callers in the first week.  No longer.

We can help.  Consider some new options.  Have you considered selling your home with Owner Financing.  Even Realtors(tm) are now suggesting this helpful strategy to get buyers into the home quickly, get your cash flow started, and help the buyer improve their credit or get time to qualify for a Refinance Loan.  We can help you with that strategy.

If you are facing crisis, there are more possibilities.  We may be able to make your payments.  If you are facing foreclosure there may be a way to get out without damaging your credit.  We will explore possibilities with you.

Remove the Burdens
We are buying you time.  Sell your house now, instead of 9 months from now!

You can make your pressing decision without distraction or pressure.  We want to help you.  We can explore ways to remove the burdens holding you back.

We can relieve you of the burden of time and expense you have in selling through slow traditional channels in the current sleepy market.  There are more houses are on the market for buyers to choose from.  How will yours stand out without aggressive marketing to a specialized motivated audience?

THS uses innovative multi-channel marketing approaches.  We also use creative ways to help buyers get into a house.  It is hard to get a home loan nowadays — through traditional bank channels.  There are other ways.  We explore these with buyers.

We work with a select network of investors and other creative buyers that are willing to take on the risk of buying in a down market.  We have found the buyers we work with to be compassionate people. We will work with you to meet your needs.  We will explore options.

Your Advocate
We work with brokers and investors who will help first-time buyers.  In some cases, we can even finance a house ourselves to folks who cannot qualify for a bank loan.

We work with buyers, either occupants or investors who will take over the burden of repairing and finding buyers.  We work to meet your needs.  Though factors must be balanced, there is no reason anyone should lose on a real estate deal.

With More Mortgage Craziness, FHA further DISCOURAGES Refinancing!!
But here is a Simple Fix!  FHA, Are you listening?

Texas Home Strategies assists homeowners and sellers to explore options open to them and to assist with difficult decisions.  Free consultation.  How can we help you?
682-325-8439   817-860-2811

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Note to Self: Never build my house around a swimming pool!

I saw something amazing the other day in Oak Cliff (Dallas).  I looked at a house in the Red Bird area built around a swimming pool!  I guess it sounded like a good idea to them at that time! But mildew, warped wall boards, rusted metalwork, rotting door frames!

Guess I ought to write a blog about this one!  Well, OK, since you asked!

I look at “distressed” homes, need work, good basic structures, but neglected, you know the sort.  I saw a listing for a huge place, almost 5000 sq ft, but with a price similar to “normal” homes in the area.  I was curious.  When I got there to evaluate this home, I found it was built around a swimming pool, and the main entrance to the home was like an arena or public swimming pool entrance!  Hard to describe.

This unique home is a beautiful property and has a good external appeal.  But the moisture over the years had destroyed the immediate area around the pool, floor to ceiling, mildew, rot, falling ceiling panels, rotted out door frames, curling and rotting wall panels — well, just sad!

It was a good idea.  The place was laid out like a community center.  A fairly large living area was built in an L around the pool, with the bedrooms along the back side of the pool.  The huge living room connected to the kitchen was like a clubhouse with a wall of full glass windows and sliding doors opening onto the pool.

The three-car garage connects to the pool entry area, so to get to the living area of the home, you pass by the showers and changing area of the pool surrounds, then along the pool.  And because the pool and related facilities are all under the same roof, the taxes were enormous, based on the total covered square footage of nearly 5000 square feet.

An expanded entertainment or living area filled out the middle to front of the house, with a double fireplace in wall separating the two living areas.

But for a good idea to work, you have to figure how to mitigate the destructive tendency of all that moisture over the years.  I hope someone can make something useful out of this.  My repair estimate for the enormous reconstruction/restoration costs was $46,500.  I did not see how the current market value, in even that upscale Redbird area, would bear it.

Here is what I would do if the figures and funds would work out.  I would unenclose the pool.  Open up the outside wall of the pool, which is a full wall of glass like the inside wall separating the pool from the living area of the house.  But much would be required to fully wall off the housing area with a full external wall between the bedrooms and the pool.  What a budget that would require.

So don’t ever enclose your swimming pool as part of your living area.

I learned this property did sell on 31 August 2011.  It will be interesting to see what they do with it!  I will track this property and watch for its relisting as a renovated property!  Open House, here I come!  This should be a great learning event!

Here is the realty listing.

Texas Home Strategies assists homeowners and sellers to explore options open to them and to assist with difficult decisions. Free consultation. How can we help you?

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Faucets and Leaks

What do you do when a faucet starts leaking?  We had a problem a while back at our house, when we realized the floor of the cabinet under the kitchen sink was damp.

We could not see any drip and could not tell where it was coming from.  There was some funny stuff going on, and we were not liking hte moist dank smell that we realized was already developing.

We called our home warranty people, and they sent round a plumber.  The Plumber could not find the problem initially, but gave me some clues and instructions on how to check and determine the source, before we started knocking holes in the wall and messing stuff up!

After watching and investigating we finally were able to find that the small gate valve for the hot water side was indeed leaking, but it seemed to be intermittent.  I disconnected the dish washer, and found there was water under the dishwasher.

This was not good, since the dishwasher had not worked since we moved in!  I have not yet put in the new one, and this was a good time to get that one out and soak up the water I found under it!

I did some trouble shooting and finally had to come back to that single faucet.  I called the plumber back and he came to proceed based on the clues we had.

It turns out it was that gate valve, to which was also connected the dishwasher pipe.  When he removed the valve we saw that it was eaten up inside with corrosion.

It looked like it should have been spewing!  But it was solid outside.  So we redid the connection, added a second valve to control the dishwasher connection and got everything back in order!

I had a similar but much easier problem with leaking outside faucets when we moved into our current house.  With some help from Internet research and Lowe’s, where my wife went to ge the fixin’s, we got this one done.

Here are some practical steps to fixing a leaky faucet:
8 steps to fixing a leaky faucet

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Topics and Discussions in Real Estate Investment

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What Determines Market Prices?

What sets market value?  Not the prices people ASK, but what buyers are willing to pay for a house.  When something does not sell you lower the price as an incentive.  SO when selling slows down, prices get lower.

The price of recently SOLD houses tells you what a house can likely be sold for.  If prices people are willing to pay drop below what is owed on a current mortgage, then a Short Sale is the primary way to make an adjustment.

A “short sale” is the term used when the bank holding the mortgage agrees to take less that currently owed.  In our market, a huge percentage of homes are upside down like this.  The owner now owes more than the home is worth!  (More than anyone is willing to pay or is paying for neighboring houses.)

If the homeowner decides it is not worth it to keep paying on such a house, or loses their job and cannot keep up the payments, the house will likely be foreclosed.  But then the bank cannot price the house above the market, so it normally needs to be discounted anyway.

So we see more banks now agreeing ahead of time to let the buyer advertise the house for sale, and agree to take a “short” offer, eating the loss.*

Thus short sales are not a decrease in value, but a way to adjust to the current value, or BUYING price.  Unsold houses further depress the economy.  Lower prices create sales.  In many cases, this makes a great deal for the home buyer.

Market value is what buyers are willing to pay for a house.

*(Although most people are not aware of a back-door deal that actually insures them against this loss.  You and I, the taxpayers, will pay the difference!  Or rather, we will begin paying the interest on the money the government borrows to enable FDIC to bail out the bank on that particular mortgage.)

Initially written as comments on a Real Estate blog
Developed for the Home Strategies blog 8 July 2011

Texas Home Strategies assists homeowners and sellers to explore options open to them and to assist with difficult decisions.  Free consultation.  How can we help you?

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How Much Do You Owe?

Why Would a Buyer Ask You How Much You Owe on Your House?

On a discussion list I saw a comment from one home seller who commented that he got a call from someone about his house who asked “personal questions, like how much I owe on the house.”  He wondered why a potential buyer would want to know this.

Hmmmmm, why WOULD a buyer want to know how much is still owed on the house?  Think about it a minute.  Have you been reading the papers the last two years?

Have you heard about the real estate slump, as some call it?  It is hard to sell a house, and buyers are smart and wary.  Many are doing extensive homework and learning smart ways to evaluate and offer on homes.  It is a buyer’s market.

Market prices and values have plummeted.  We have not yet seen the bottom.

Under Water?
Do you know anyone who now owes more in a mortgage than his house is even worth?  This is definitely something a buyer would want to know.  Offering on such a home would involve working with the bank for a short sale, or some other creative strategy to meet the needs of both buyer and seller.  Working a short sale is not an easy task.

There are many ways to make an offer on a house.  The balance owed is one factor necessary to know whether it is even worth making an offer on a house.  The balance owed on the house is a critical factor these days when some mortgages are much higher than the market value of the house.

Savvy Buyer
It sounds like this buyer is an informed buyer, maybe an investor with money for a quick sale.  The amount currently owed very much affects the value of a house offer.  They might work with the seller to get the bank to take less than still owed on the mortgage.

One Realtor explains that this factor can affect the speed of closing, also, a critical factor in some situations.  A buyer may also want to know for their own reasons if you as the seller can close quickly.

Quick Sale
The buyer will want to find an “equity positioned owner who is ‘willing and able’ to repay any existing liabilities on the home if applicable. The key advantage to a prospective purchaser is the response time with most offers being acknowledged and accepted on the the same day. The closing date is negotiable but it is customary for a home in this position to complete within 5 – 30 days” (blog article no longer online).

What if, after looking for weeks or months, you are suddenly offered a fantastic new job, but it is in another state, and you must report in 30 days or lose your opportunity!

Closing quickly will be your primary value, too.  You’ll want a quick-cash buyer who can quickly figure the deal and make you an offer.  The more the buyer understands about your situation the better you can come to a mutually beneficial deal.

Out of the Box
There are creative ways to make an offer even in such difficult financial circumstances, which a conventional lender will not be able to do.  And many buyers don’t want to wait 6 to 24 months to qualify for a conventional loan.  And you as a seller certainly don’t want to have your house sit on the MLS for 9-12 months.

But that is what is happening — unless some non-conventional approaches are taken.  This is where some private lenders and investors help very much.  They can match up sellers and buyers and structures deals in creative ways that enable everyone to win, not just the bank!  They help fill the gap and alleviate the crisis the conventional bank mortgage system created.

Most realtors are unaware of ways to sell quick and don’t like to let sellers know there are ways they can make more or save more money, like owner financing, in which YOU make the interest on the loan instead of the bank!

Particularly for sellers who have to sell quickly.  Real estate specialists can even work on your behalf with your bank if you get behind on payments, or even get a notice of default.  You can even stop a foreclosure, with the right strategy.

Personal Touch!
But do not decide on this over the phone.  Meet the person you will deal with.  If you have advertised your house, provide as much information as you can to those who call on your ad.  But if someone calls to make the first contact, if they want to follow up on your initial phone information, expect them to arrange a face-to-face meeting.

Even if you are pressed financially, facing foreclosure or must sell quickly. No one can talk to your bank until you sign a specific authorization naming the person or company who will work on your behalf.

Some buyers have private lenders who can close in a few days instead of weeks.  But they have to know the values in the deal.  Yes, how much is owed on the house can be important, at least for some buyers, to understand the value of a house.  Don’t be afraid to discuss this aspect of your house sale.  It is a buyer’s market.

Texas Homes Strategies  682-325-8439

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