MONEY buying a home

21 Reasons Why Corner Lots Are For Suckers

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Caiaimage/Paul Bradbury—Getty Images

Less privacy, more dog poo.

From time to time we bring you posts from our partners that may not be new but contain advice that bears repeating. Look for these classics on the weekends.

For the six people left in America that are still looking to buy a home, I thought I’d pass on a little advice and save you a serious case of buyer’s remorse.

Don’t be fooled by real estate agents that try to tell you that a corner lot is highly desirable. They’re not.

Oh sure, you’ve got a bigger lot and neighbors on only two sides, but as a former corner lot owner, trust me when I say the cons far outweigh the pros.

In fact, besides often being more expensive to buy, here are 21 additional reasons why corner lots just aren’t worth it:

1. Noise, noise, noise. Double street and sidewalk frontage means double the noise from pedestrian and car traffic. Pull up a chair and crack open a cold one; I’m just gettin’ started.

2. Unconventional configurations. For example, the front yard of a home on a corner lot is usually bigger than the back, and the garage may be located around the corner.

3. Yard — lots of it. Larger lots mean more to mow. It’s even worse when the lawn is big but not so large that it justifies buying a riding mower – which is usually the case.

4. Yard — lots of it (Part II). All things being equal, larger lawns have higher landscape costs.

5. More trash to pick up. Cars stopping at a stop sign are more likely to dump their trash on your big front yard. You’re also liable to get more trash because…

6. Corners make great school bus stop locations. Hey, I have kids too. I’m just sayin.’

7. Less privacy. Yes, you have one less neighbor, but in exchange for that you get foot traffic on twosides of the house instead of only one. Trust me, if you’re worried about privacy you’d be better off with the extra neighbor. Speaking of foot traffic…

8. Kids and other pedestrians like to use corner lawns as a shortcut. When given the choice, most people will save 16 seconds of their life by cutting across the front lawn of a corner home. But before you get any bright ideas, just remember this…

9. Less privacy (Part II). Many jurisdictions severely restrict privacy fence heights or prohibit them all together for traffic safety. Even if there are no privacy fence restrictions, corner lot owners have to deal with…

10. Higher fence costs. Having one less neighbor to deal with is terrific! Well, unless you need to borrow a cup of sugar. Or you’re trying to get your neighbors to share the cost of a new fence.

11. Double tax assessments. Because corner lots border streets on two sides, you may get hit for twice as many sidewalk and street assessments.

12. Double set-back requirements. Owners of corner lots may be subject to city or other jurisdictional easements or set-back requirements on two sides of their property, rather than just one.

13. More dog poo. Although I haven’t taken the time to do a definitive scientific study, I’m quite certain the probability of an off-leash neighborhood dog pooping on a corner-lot front lawn is 100 percent. Prove me wrong.

14. Greater risk of a car crashing into your house. Okay, I admit it; the probability of this happening is about as likely as Christina Aguilera hiring Taylor Swift as a vocal coach, but it’s hard to argue that it ain’t true.

15. Bigger snow jobs. For those of you who live in colder climes, more sidewalk means more snow to shovel.

16. Less privacy (Part III). Corner lot backyards are exposed to the public. That can be a nuisance if you’re trying to have a private family barbecue — or sunbathe in the nude. (Not that I do that, but to each his own, right?)

17. More light pollution. Increased street lighting and headlights from cars turning corners can be a nuisance.

18. Yard — lots of it (Part III). Folks on corner lots have more leaves to rake — especially those who live downwind from adjacent parks.

19. More vulnerable to burglary. Because there are fewer neighbors surrounding the home and more escape routes – courtesy of streets on two sides – homes on corner lots are bigger burglary targets.

20. More pressure from neighbors and associations. Because corner homes are often considered gateways to streets or cul de sacs and neighborhoods, the appearance of these homes are often held to a higher standard by the community and neighborhood associations.

21. They are harder to sell. Most realtors will tell you that corner lots are tougher to sell. Gee, I wonder why.

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MONEY home maintenance

4 Ways It Pays to Save Your Home Repair Records

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Tuomas Marttila—Getty Images

Receipts for repairs and replacements can save you time, money and hassle.

It’s the moment of truth: You just had your furnace tuned up, with a fancy new filter that leaves dust mites equal parts frustrated and terrified. Carl, your new favorite furnace tech, pulls off a carbon copy of your work order (in a flattering pink shade) and hands it to you. You walk Carl out and bask in your dust-free, perfectly temperate climate, looking down at your fuchsia receipt. As you begin to crumple it into a ball, a sliver of doubt appears.

Should you keep this slip of paper? (Answer: Probably.)

It’s worth getting a scanner (or even a scanner app on your smartphone) and filing all these receipts away in Dropbox or iCloud — or going retro with a filing cabinet if you’re feeling sassy. Here’s why:

1. Know when to spend

Are you good at breaking things? My washing machine had problems from day one. Turns out, I was way too ambitious about the size of load it could handle — but didn’t learn that until a technician wearing those weird paper booties came to my house.

You need only a few of those experiences before you realize it’s not worth throwing good money after bad. If you keep your receipts and maintenance records, you can figure out when it makes sense to just buy a new one and push your old large appliance into a rock quarry. (Except for the rock quarry part; don’t do that.)

2. Selling your place

People go a little nuts when buying a home. When you’re selling, chances are good that you’re going to run into a buyer who is over-the-top bananas meticulous. They’re going to want to know not only how many years old your new gutters are, but also what time of day they were installed, the blood type of the man who installed them, and also whether Saturn was in retrograde at the time. (It affects gutter strength, you know.)

And that’s totally cool; they should do their due diligence. But when they come at you with questions, you need to be ready to throw down your receipts as though they’re a royal flush.

3. Insurance fistfights

Let’s say insurance pays for a new roof after a tree falls on your house and damages it. You’re happy until four months later when, for reasons unknown, the insurance company decides it paid too much and wants some money back. What in holy heck? (It’s true; I’ve seen it happen.)

If you have your maintenance records and your receipts for the repairs, then you can fight it. It won’t be fun, but it will keep money where it belongs — in your pocket.

4. Budgeting brigade

Repairs are inevitable and maintenance should be too, lest your home veer into shanty status. It’s all a pain in the pocketbook when it happens: $100 here, another $450 there. And the worst part is, it always feels unexpected.

Here’s a good idea: Hang onto your maintenance records, and when you have a year’s worth, crunch some numbers to set up a maintenance budget for the year. Budget a little higher at the start, but do this every year so more data will make it more accurate. That way, when something goes wrong, you will have the money ready to spend and it won’t feel as though you are taking it away from something else.

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MONEY

These U.S. Cities Have the Most Roach, Rat, and Mouse-Infested Real Estate

rat tails on city sidewalk
Johnny Milano—Polaris/Newscom

New York wins; Detroit ranks low on the infestation scale.

In my first-ever apartment, we had a mouse. Just one mouse, I thought—more than the ideal number, but few enough that I could handle it—and so I coped. I named the mouse. I told stories about the mouse. Sometimes I even thought it was sort of cute. Until, in the middle of one such story about my favorite little rodent, a friend interrupted to deliver an unsettling truth: “There is no such thing as having just one mouse,” he explained. Which, in hindsight, explained why the sightings were getting more frequent.

The U.S. Census Bureau knows—as I do now—that mice, like other pests, are never truly few enough in number to be cute. Thanks to year-round breeding and gestation periods of only about three weeks, they’re better identified as a prolific health risk and—given that homeowners’ insurance rarely covers the costs of infestations—an unwelcome surprise for your wallet. The U.S. pest control industry generated nearly $7.5 billion dollars in revenue in 2014 alone, providing services to slightly more than 10% of U.S. homes. A mouse problem could cost you anywhere from $100 for an initial inspection to upwards of $1,000 for full extermination. Up the ante to bed bugs or termites, and you could be looking at thousands of dollars to get your home back to a pest-free state as you replace mattresses or repair structural damage.

Which is why the Census Bureau’s American Housing Survey, carried out biennially, collects data on household pest sightings: cockroaches, rats, and mice, to be specific. Bloomberg has done some extra number crunching since the AHS released its 2013 Survey results earlier this year, and as of Thursday the rankings are in for the “roachiest,” “rattiest,” and most mouse-infested metropolitan areas in the country:

Roaches like their water, so naturally the humid South is not looking good on roach control: Tampa topped Bloomberg’s charts for roach sightings, with nearly 40% of households reporting them. Houston didn’t trail too far behind, and both Miami and Orlando broke 30%.

Nearly 20% of Philadelphia-area households surveyed reported evidence of mice in the last 12 months; Baltimore, Boston, and Washington, D.C. didn’t rank too poorly, either.

And while rats were the least common menace of the three—less than 3% of households across all cities reported evidence of rats—1 in 50 households in both Seattle and Austin seem to have them.

150730_EM_InfestedCities2
Johnny Milano—Polaris/NewscomJimmy holds up two successful catches at a single site in New York City. He is part of a group of men and women who train their dogs to help get rid of the city’s immense rat population, often catching up to 20 rats in a single night, among a group of approximately 10 dog owners.

Unfortunately (for the staff at MONEY) when Bloomberg tallied the scores to determine the most infested city overall, it was New York that slid in from behind for a win. Austin came in second. Detroit, surprisingly, was 25th out of 25 for its percentage of residents reporting mice, rats, and cockroaches.

As Bloomberg points out, the AHS survey has its faults. Most strikingly, it doesn’t include data from Dallas, Los Angeles, or San Francisco among the 25 metropolitan areas. But it also tells us quite a bit about housing and income inequality: Though mice were an affliction for households across all demographics, evidence of cockroaches or rats was 50% more likely in households living below the federal poverty line, and also far more likely in Black and Hispanic households.

The survey also suggests that pest infestations are common enough, from New York to even Detroit, that you should get smart about them. For starters, when you’re buying a home, never skip the pest inspection, especially one that looks for wood-destroying organisms like termites—a couple hundred bucks now could save you many hundreds or thousands in the long run. Even so, you should have an emergency fund for just that sort of screw-up. And should you encounter any critters in a home you already own, don’t wait to get the problem diagnosed and treated. Even mice can chew through crucial elements of your home, like electrical wires—and when the bones of your home are at stake, time can mean serious money.

As for the full rankings, you can check them out on Bloomberg.

MONEY home selling

How to Sell Your House Without Paying an Agent’s Fee

For Sale sign illustration
Robert A. Di Ieso, Jr.

Q: Do we really need a real estate agent to sell our house? — Peter Koo, Kent, Ohio

Real estate agents typically charge a 4% to 6% commission on the sale price, so selling without an agent could certainly save you big bucks. Even after you pay $1,000 or so for your own online ads, open-house brochures, and a lawn sign, you would still probably clear an extra $14,000 on a $300,000 sale, $24,000 on a $500,000 sale, or $36,500 on a $750,000 sale.

And that’s not the only advantage to selling it yourself — a process often referred to as “for sale by owner,” or FSBO (pronounced “fizz-bo”). “You get to control the negotiation, rather than having it filtered through a middleman,” says Los Angeles real estate attorney Zachary Schorr.

While a good agent can certainly help with the negotiation process, he or she also has a vested interest in the transaction. “And closing the deal may in some cases be more important to the agent than getting you the absolute best price,” Schorr says. If you’re a good negotiator and can handle the process without emotion and with clear eyes, you might do better on your own.

You will need to write your own description of the house, take your own photos, and give your own tours to prospective buyers. “If you excel at these things — or if you’re a control freak like me — you may do a better job than some realtors would,” Schorr says.

The Downsides

Make no mistake, though: Working without an agent requires a huge investment of time, knowhow, and effort. You need a wide range of skills, from home staging to salesmanship to negotiating. And you need to be able to completely divorce yourself from the emotions that can arise when a buyer takes a dig at your curb appeal or lowballs the offer on the beloved home where you raised your family.

If these factors don’t dissuade you from attempting to sell it yourself, here is how Schorr suggests overcoming the three biggest challenges you’ll face:

Limited pool of buyers: Most serious house-hunters are working with a real estate agent; the commission would normally get split between the buyer’s and seller’s agents. But without a commission on the table, no agent is going to bring clients to see your house. In fact, many shoppers are contractually obligated to purchase their home through their agent — meaning even someone who finds your house while out on a drive or surfing the Internet may not easily be able to buy it.

If you don’t get any offers, Schorr suggests a compromise solution: State in big bold type in your online ads and your lawn sign that you will pay a 2.5% commission to the buyer’s agent. You’ll only save half as much in commission costs, but you’ll get a much bigger pool of potential buyers coming to look at your place.

Bargain hunters: Of course, some buyers may find you even without a buyer’s agent. “If you have a great house, in a sought-after neighborhood, and you’re on a busy road where you’ll get a lot of visibility, then you might do fine working with only the unsigned homebuyers who discover your house on their own,” says Schorr. If you’ve got a charmer with a great kitchen in an affordable price range, they’ll find it online no matter how far off the beaten path you are.

The trouble is that those buyers may seek to discount the purchase price: Because they know there are no agents involved, they may feel that they should benefit as well.

How should you handle that? It depends. If you’re in a great house that sells itself, stick to your target price. But if you’re thrilled to get an offer because you can’t stand showing the house anymore, split the commission savings and make a deal.

Lack of advice or tools: You may miss an agent’s help throughout the process, starting with when you set a listing price. Online price calculators may not be sufficient to determine the fair market value of your home because they use completed sales, which tend to lag the market by a few months. Also, the algorithms don’t necessarily account for factors like curb appeal, landscaping, recent renovations, or school district lines.

A smarter idea is to hire an appraiser to value your house, likely for around $300 to $500.

You may also want a lawyer to produce and review contract documents; some states actually require you to hire one. Although you can find much of the paperwork online, Schorr says, “you need to tailor it to your deal — and the way you fill it out is just as important as what the boilerplate language says.” You’ll probably pay $1,000 to $3,000, depending on the cost of living in your area, but you’ll get an experienced pro who’s in your corner and can make sure the deal gets done right.

Obviously, these solutions all can eat into your sell-it-yourself savings. So try going it on your own for several months.

If your house gets lots of attention and you get good offers, stay the course and be prepared to give up a little of your savings to close the deal. But if the process drags on without any real bites, hire an agent. You’ve lost nothing but time, and you’ll enter the agreement with a far better understanding of how it works and how to get the most from your agent.

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TIME breaking bad

Here’s Your Chance to Pretend to Be Jesse Pinkman

A Look At "Breaking Bad" Locations Through Albuquerque
Steve Snowden—Getty Images A view of Jesse Pinkman's house.

‘Meth lab not included’

Always wanted to live out a Breaking Bad fantasy without actually operating a meth lab? Here’s your chance. Two of the houses featured in the critically acclaimed series are on sale in Albuquerque, N.M.

The house where fictional Jesse Pinkman lived in the series has an asking price of $1.6 million —”meth lab not included” — according to the Coldwell Banker’s press release. The realtors for the house, a mother-daughter team, created a website touting its celebrity status. The house, which was posted for sale Tuesday, has two stories, with 3,500 square feet, and four bedrooms. According to TODAY, the house for sale wasn’t used to film the parties or any “intense” scenes.

Though the series ended almost two years ago, Breaking Bad still gets plenty of hype. “Better Call Saul,” a prequel series that premiered earlier in 2015, was recently nominated for an Emmy. And Albuquerque’s tourism industry continues to capitalize on “Breaking Bad” buzz, offering tours of key locations in the series.

MONEY mortgage

This City Has Nation’s Healthiest Housing Market

Beacon Hill neighborhood of Boston, Massachusetts
Getty Images/iStockphoto Beacon Hill neighborhood of Boston, Massachusetts

The healthiest market isn't necessarily the most affordable.

The Red Sox may be in the cellar. But when it comes to its housing market, Boston is first in the nation.

That’s according to a recent report by financial Web site WalletHub, which ranked the relative health of real estate markets in the nation’s 25 largest metro areas. Researchers determined a market’s “health” based on factors like how much equity owners had in their homes and who paid the lowest interest rates.

Oklahoma City ranked second; San Antonio was third. Four Florida cities ranked in the bottom 10 (Miami, Jacksonville, Orlando, Tampa), while Las Vegas was dead last.

On average home owners in Boston have 43% equity in their homes, meaning their mortgages amounted to only slightly more than half their home’s value. The rate was second in the nation, just behind New York City.

Boston also had the second smallest pool of “underwater” mortgages — the scenario in which the owner owes the bank more than the home is worth. About 6.7% of Boston mortgages were underwater, placing just behind Rochester, N.Y. In Las Vegas, by contrast, 39% of homes are underwater.

Of course, one thing that a “healthy” housing market doesn’t guarantee is that you can afford to live there. Boston’s median home price is nearly $450,000, according to Zillow. That’s up from $326,000 at the height of the housing crisis.

The key to Boston’s success: Attractive housing stock and a strong technology and life sciences industry that have helped draw investment and educated young people, according the hometown paper, the Globe.

 

 

MONEY home financing

4 Things Your Bank Won’t Tell You When You Get a Mortgage

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Ed Freeman—Getty Images

2. Time is not your friend.

As the Consumer Financial Protection Bureau strives to create more transparency within the mortgage industry, there are crucial homebuying truths that endure — and knowing what they are can help you to be better informed as a homebuyer. But don’t expect to hear them from your bank.

1. You Can Get a Better Deal Elsewhere

Fannie Mae and Freddie Mac publish mortgagee guidelines that banks use to originate loans. In addition, individual banks may place additional credit requirements on these guidelines to minimize their risk. Let’s say that Fannie Mae has a maximum debt-to-income ratio of 45%, but the bank that you’re applying with has a maximum debt ratio of 43%, conforming to the CFPB’s definition of a ‘qualified mortgage.’ Your bank will likely never tell you can get a better deal elsewhere, even though you probably can. When you work with a bank, you are limited to their programs and their products. Direct lenders, brokers and some smaller banks have access to more credit, which ultimately dictates whether or not your loan will move forward.

Caveat: A better loan offer elsewhere is not a better offer if it won’t close because you are unable to meet the loan guidelines. So make sure that you can meet the requirements of that “better deal” before you go for it.

2. Time Is Not Your Friend

Once you’ve locked in your interest rate, the clock is running – and time is now indeed money. Let’s say you’re nearing the end of your 30-day interest-rate lock, and you need an additional 15 days. Your lender might charge you as much as 0.25% of the loan amount – on a $300,000 loan, that’s $750 more in fees because you took an additional week to get your financial documentation back to the lender. Lock fees vary, as do rate lock policies among banks. Be informed, ask upfront. After you have chosen to lock your rate, get your financial documentation back to the lender in 24-48 hours as needed in the process. While this is recognizably an inconvenience, it will ensure that your loan closes in the timeframe in which the interest rate is locked.

FYI: The reason why interest rate lock extensions cost you is because if interest rates go up and you’re locked in at lower rate, your loan is less profitable, and therefore less desirable, to the end investor.

3. You’d Better Have a Ton of Equity

Equity is a crucial factor when applying for a mortgage. If you intend to get the absolute lowest possible interest rate the market will bear you’re going to need a minimum of 30% equity in your home — ideally more. Mortgage pricing adjusters (factors that drive mortgage costs) — like occupancy, credit score and loan-to-value — begin after a loan to value of 65%, or 35% equity. That means if you have 35% equity to finance a loan for an owner-occupied home, the pricing is going to be quite a bit better than if you have 25% down, for example. Loan officers will normally tell the borrower the minimum amount they need to get a mortgage, but not necessarily the minimum amount they need to get a mortgage with the best possible combination of rate and fees.

Here’s a nifty calculator you can use if you want to see how much home you can afford. Your credit score also has a big impact on that number.

4. Appraisers Hold All the Cards

Mortgage professionals who work in a non-banking capacity will be more likely to tell you that appraisers do hold all the cards. Loan professionals who work for a bank have more rules and requirements for originating than non-bank loan officers. Additionally, many bigger banks own the appraisal companies, subsequently getting a piece of the appraisal revenue. The Home Valuation Code of Conduct that arose in the aftermath of the financial collapse took away the ability for loan officers to have any direct access to appraisers, including the ordering and scheduling of the appraisal. Currently, the entire appraisal process is automated to meet federal compliance regulations.

Now, you may qualify for a mortgage on paper with your credit score, income, credit and debt, but the appraiser’s opinion of your home’s value can kill your mortgage, even though a different appraiser’s opinion of value may give you a green light. Even a $5,000 difference in value is enough to throw a loan off-course. Should your appraised value not meet expectations, you do have recourse. Ask a real estate agent friend to pull comps identifying neighboring houses not included in the appraisal report. Next, ask your bank to have a “re-consideration of value” performed with the new information. In most cases, it’s a 50/50 shot, as the loan industry has been forced to give appraisers absolute power.

The more clarity and understanding consumers have about the loan process, pricing and general guidelines, the more information they will have to make an educated choice. Always best to continually ask questions — and then some — throughout the transaction.

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MONEY housing

U.S. Homeownership Drops To Its Lowest Level Since 1967

aerial view of neighborhood
Jake Wyman—Getty Images/Aurora Creative

The last time homeownership levels were this low, LBJ was president.

Data released by the Census Bureau on Tuesday reveal that the U.S. homeownership rate stood at 63.4% for the second quarter of 2015. The rate is down slightly compared to the first quarter (63.7%), and it represents the lowest level of homeownership in America since 1967. If the homeownership rate drops just a few more tenths of a percentage point, it would reach a new all-time low since the government began tracking such data in 1965 and the rate was a flat 63%.

In fact, some housing experts say it’s fairly likely the homeownership rate will continue to fall and will indeed hit a record low in the near future. “We may have another percentage point to go before we see a bottom” in terms of the homeownership rate, Mark Vitner, senior economist with Wells Fargo Securities, told Bloomberg. “We’re still suffering the effects of the housing collapse and the financial crisis.”

The bull market and an improving jobs picture would seem to bring with it rising homeownership levels. Yet as a recent Harvard study pointed out, many would-be homeowners—particularly younger ones, in their 20s, 30s, and 40s—are still struggling in the aftermath of the Great Recession. Wages have been stagnant for the middle class, and many households are cautious about jumping into homeownership in the face of hefty student loan debt and memories of being burned in the housing crash. Rising home prices don’t help ownership levels either.

All combined, these forces are conspiring to make renting seem like the wiser option over buying lately.

For the sake of comparison, the 50-year average for homeownership in the U.S. is 65.3%. The rate rose through the 1970s and early 1980s, before dipping to around 64% or slightly under in the late ’80s and early ’90s, a period marked by economic downturn in much of the world—and a recession that lasted eight months in the U.S.

Fueled by easy credit, a booming economy, and boundless optimism, the homeownership rate soared in the late ’90s and early ’00s, nearly hitting 70%. The 69.2% homeownership rate of 2004 is currently the all-time high. Based on how things have been going, it very well could remain as the record high for years or even decades to come.

MONEY selling a home

I’m Trapped in a House I Can’t Afford to Sell

house padlocked
Steven Puetzer—Getty Images

What to do when you're underwater on your mortgage.

Eddie would like to to sell his home, but like millions of Americans, the widely touted housing recovery hasn’t fully reached his North Akron, Ohio, neighborhood. He owes about $60,000 on his mortgage and the two experienced real estate agents he consulted put the value of his home at somewhere around $58,000 to $59,000. Even if he were to find a buyer who would pay the full $60,000 he owes, by the time he paid a real estate commission and closing costs, he would have to bring a few grand to the table.

“Being underwater on the mortgage has me trapped here,” he writes in an email. “As I sit here right now, I cannot even sell my home without taking a loss, and that will prevent me from buying the next house.”

Eddie’s not alone. According to CoreLogic, at the end of 2014, 10 million (20%) of the 49.9 million residential properties with a mortgage have less than 20% equity (referred to as “under-equitied”) and 1.4 million of those have less than 5% equity (referred to as near-negative equity). According to the Zillow Negative Equity Report, “the rate of underwater homeowners was much higher among the homes with the least value.”

What can borrowers who find themselves with little or no equity to do? Here are six options.

1. Cough Up Cash

Coming up with cash to get out of an unaffordable home may make sense if it will save money in the long run. Run a “break even” analysis to find out at what point your monthly savings will exceed the money you must pay to get out. For example, let’s say Eddie would have to come to the closing table with $5,000 to get out of his current home loan. If he saves $100 a month in a different home it will take him 50 months to replenish his savings with the money he paid at closing. After that, his $100 a month savings is money in his pocket. But if he’d save $300 a month on a new home, it would take less than two years to come out ahead. (Of course, that’s a simplistic example that doesn’t take into account taxes, the cost of moving or buying a new home, etc.)

In order to reduce the money they have to pay to get out of their homes, some borrowers are opting to sell their homes themselves to save money on real estate commissions. (Ever wonder why real estate commissions are often 6% of the sales price?) This may be an option for a seller who is comfortable doing most of the work themselves and in no rush. Be sure to factor in closing costs as well. Some may be negotiable, but some won’t be.

2. Let It Go

At some point, it may make sense for a borrower to cut their losses and move on, whether that involves deed-in-lieu of foreclosure, a short sale, a bankruptcy or a combination of those.

In Eddie’s case, he has a very good reason to avoid this route. Over the past two years he’s been diligent about rebuilding his credit scores and has made significant progress, raising his credit scores anywhere from 75 to 100 points or more, depending on which credit scoring model is being used. (You can get your credit scores for free on Credit.com to see where you stand and to track your credit-building progress.)

“He’s worked so hard to improve his credit score I wouldn’t want to recommend anything that would take him in the wrong direction,” says Credit.com contributor Charles Phelan, founder of SecondMortgageAdvice.com. For example, if he stops making his mortgage payments in order to get his lender to agree to a short sale it would cause significant damage to his credit scores. Since he’s not in distress, it probably wouldn’t make sense.

For those who do think it’s time to let go, however, it’s a good idea to get professional advice as there may be both legal and tax implications to walking away from your home. Here’s a complete guide to your options if you are underwater on your home.

And there’s another option that might work: “If a seller can prove that he or she has buyer – as evidenced by an executed purchase contract with a meaningful earnest money deposit in escrow – the seller can use that as leverage to haircut the loan just enough to make the deal close. But just calling the bank and asking them without anything in writing and earnest money won’t do anything,” says Salvatore M. Buscemi, author of Making the Yield: Real Estate Hard Money Lending Uncovered. And if the lender won’t budge, “the buyer isn’t obligated to cover any shortfalls for the seller,” he warns.

3. Pay Down Debt

Paying down the principal balance on your mortgage can get you to positive equity faster. Eddie says he has taken a part-time job to bring in extra cash to do just that.

A word of caution: homeowners need to be careful not to become “house poor” by sinking all their their money into their home, and failing to leave cash available for emergencies. If that happens, it’s easy to end up in a situation where they are forced to run up credit card debt to fill in the gaps.

4. Raise the Price

Increase your home’s value and you may be able to get a higher price. “I began a renovation that will encompass the kitchen (refinishing cabinets, new range hood, new lighting, fresh paint and laminate flooring) the bathroom (a tub surround, a shower door and a new floor), and the living room (these awful white walls will soon be tan),” Eddie says. “Hopefully once these renovations are complete I will see my home value increase by at least $5,000.”

“Cosmetic improvements or little incremental improvements can start to bump the value up,” says Phelan, “because he’s not that far away from having property that’s coming back in the money.” Just be careful to focus on improvements that are likely to increase the home’s value. Be especially careful about going into debt here. If the home doesn’t sell, you’re stuck with that extra monthly payment.

Eddie’s decided it’s worth a try. “Worst case, I will have a house with three rooms renovated,” he says.

5. Rent or Be a Renter

For those who can swing it, another option may be to go ahead and purchase another home now, says Scott Sheldon, senior loan officer with Sonoma County Mortgages and a Credit.com contributor. “If you purchase the new property as an investment property you can use the projected fair market rents to purchase the property to offset the mortgage payment, typically at 75% of the gross rents.”

In other words, purchase the new home as a rental and move into it later. “He is going to be paying a premium, a higher interest rate and higher fees, to purchase the property as an investment property,” he warns. For some, though, this could be a way to snag a property at an attractive price and then move into it later.

What about renting out his current home and purchasing the other as his primary residence? “In order to convert a primary home to a rental property you have to have 30% equity in the property supported with fair market appraisal and have a tenant lined up by closing,” says Sheldon. “This way you can use the fair market rents to offset the mortgage payment of your current home, allowing you to go buy another one.”

Since Eddie is nowhere near that level of equity yet, that option is off the table for the moment. For someone considering this path, remember that becoming a landlord can be quite risky. If your tenant doesn’t pay rent or trashes your property, your costs can mount quickly.

6. Wait It Out

Finally, if none of these strategies work, simply continuing to pay the mortgage and live in the home may be the best option. However, if Eddie stays, both Sheldon and Phelan suggest he look into whether he can refinance his current loan through the Home Affordable Refinance Program (HARP). If he brings his interest rate and payment down, he’ll be able to throw more money at the principal balance. Phelan also encourages him to contact a local housing agency for a free consultation. There may be local programs that could help.

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MONEY home improvement

How to Get Color in Your Garden Without Spending a Fortune

For Sale sign illustration
Robert A. Di Ieso, Jr.

Q: Not a single flower is blooming in my yard. We had so many in spring, but every July and August, we’re left with monotone greenery. Can we add late-summer color without spending a fortune?

A: Yours is a common problem in the northern tier of the country, where the vast majority of plants bloom in spring. But the good news is that there are plenty of affordable ways to add flowers throughout the summer and into the fall, says Tony Abruscato, director of Chicago Flower & Garden Show.

The easiest, most affordable solution is annuals—that is, plants that complete their entire life cycle in just one year. Annuals don’t come back from year to year, although you’ll sometimes get lucky and the seeds they release in the fall will sprout new plants in the spring.

The great thing about annuals is they bloom pretty much nonstop for the whole growing season, especially if you remove spent flowers to encourage new ones to form. They also spread, so a small patch of them will expand into a large patch over the course of the summer.

Annuals are also extremely low cost: about $1 to $6 per plant, versus $12 to $30 (or more) for a perennial, a plant that goes dormant for the winter and comes back the next year.

Color Options

You can get annuals that flower in almost any color. Many thrive in shady areas, which are tricky spots for flowering perennials. Popular annuals include impatiens, zinnias, petunias, begonias, dahlias, geraniums, and verbena.

Abruscato also recommends tropical perennials, which can’t tolerate northern winters and so die off each winter like annuals. These include Mexican petunia, Mexican sage, and ginger lily. “If you plant them in pots, you can move them indoors for the winter, and put them back out next spring,” he says .

There are also many standard perennials that will bloom late in the growing season. And because most people’s attention has turned from gardening to vacationing this time of year, you can often get them at a 40% to 50% discount. That means you can probably pick up a plant that will add color every July, August, or September for perhaps $10 to $15.

Abruscato suggests several long-blooming perennials: black-eyed Susan, Echinacea, astilbe, aster, geranium Rozanne, allium, Lacey blue Russian sage, and oak leaf hydrangea. Rose of Sharon shrubs also offer late-season flowers, he notes.

Ask your local garden center for plant recommendations that are suitable for your area. Then select a mix of bloom times, so something is always putting on a show in your yard.

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