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If you are one of the many homeowners who have fallen behind on your mortgage payments and you don't see any way to avoid foreclosure, a short sale may offer you the least painful way to resolve the situation.

A short sale is when a lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the home by a financially distressed owner. The lender forgives the remaining balance of the loan.

What's in it for a seller?
Obviously, the ideal scenario would be that you magically catch up on your mortgage payments and keep your home. But for an increasing number of Americans, that is not a realistic possibility, so it's to your advantage to take an active role. This is what a short sale is all about -- resolving the problem, as opposed to simply hiding from your lender and hoping the issue will go away or, worse, walking away from the property.

As a seller, there are cons to a short sale. Obviously, you will lose your home -- but that will happen anyway when the bank forecloses. You will also walk away without a cent in profit from the sale.  And, your credit score will take a major hit.

However, because you are making a good faith effort, the lender may look more favorably on you, and perhaps be willing to help minimize the damage to your credit score. You are also spared the stress and embarrassment of a long drawn-out foreclosure process.  That's may allow you to feel more in control and that you have a more direct role in paying off part of the debt. Remember, too, that every short sale is a negotiated agreement between the owner and the lender. In a foreclosure, the lender can always pursue the seller for a deficiency judgment to recoup the difference between what it was owed and what it actually collected. In a short sale you may be able to get the lender to accept the sale as "payment in full without pursuit of any deficiency judgment." The lender might agree to that release in return for the seller showing the home, maintaining it as well as possible and not trashing it on the way out.

Two short-sale killers
Before you even start considering getting involved in a short sale, there are two situations in which an attempt at a short sale is almost certain to fail.

•	No default on loan -- Lenders almost never will accept short sale offers or requests for short sales until the borrower is far behind in payments and a notice of default has been issued. (there are special circumstances)
•	Bankruptcy -- If the seller has filed for bankruptcy, forget it. Few, if any, lenders will consider a short sale when the seller has filed for bankruptcy, because negotiating a short sale is considered a collection activity and collection activities are prohibited in bankruptcies.

The lender's motivation
Why would your lender let you walk away from the home and forgive the shortfall on your loan? To save time and money. Foreclosures are expensive and time-consuming for lenders. Once the lender realizes that a foreclosure is inevitable, a short sale may seem like the lesser of two evils. Plus, short sales help the lender look good on paper -- the property was never listed as an actual foreclosure, which helps the lender's numbers.

In a January survey of senior loan officers conducted by the Federal Reserve Board, more than 65 percent of those surveyed said they anticipate steps such as short sales or deed-in-lieu of foreclosures to be at least somewhat significant loss-mitigation steps at their banks for 2008.

Convincing the lender
There's no guarantee, but if you have evidence to back you up, a lender may agree to a short sale.

But don't think it's going to be easy. It's going to take a lot of proof and convincing evidence. To make your case, you, the buyer and any agents should work together to assemble the following package.

1. An authorization letter.  You have to sign this -- and usually have it notarized -- giving the lender permission to discuss the mortgage situation with a potential buyer or an agent.

2. A hardship letter. You have to show that your financial situation is desperate. You'll have to be 60 to 90 days behind in your payments and have no significant cash, savings, retirement plans, stocks, bonds, cars, boats, vacation homes, time shares, jewelry, etc., that you can use to catch up or reduce your debt. And you will have to show the situation is irreversible -- that you will have no way to bring your mortgage current in the foreseeable future. You should supply as much evidence and documentation as possible, such as divorce papers, evidence of job loss, delinquent accounts, utility shut-off notices, car repossession paperwork, your last two years' tax returns, recent pay stubs and recent bank statements. Include any mitigating circumstances, such as medical problems or the loss of a job. The more convincing and sympathetic -- yet truthful -- the letter is, the more likely your lender will agree.

3. A statement of the property's value. This can be an appraisal or a broker's price opinion. The lower the estimate of the property's current market value, the better it will be for you. You want to show the lender it will not be able to sell the home for enough to satisfy the loan. It may not be pleasant, but you should make the home look as bad as possible on paper. Include things such as abundance of homes on your street or neighborhood for sale -- especially in foreclosure. Other pertinent information to include is the number of rundown or unkempt homes nearby, increasing crime rate, high taxes and insurance rates, and low-rated schools. Prepare a written summary of your property's condition, including a thorough and detailed list of any negatives, such as maintenance problems and evidence of disrepair. This can be tough emotionally. This is, after all, your family home, but this is a necessary part of the process. The longer a lender must hold onto a property the more expensive it becomes. If the lender realizes the property will bring them nothing but headaches, it will be more likely to OK a short sale. Richard Geller, developer of MortgageReliefFormula.com, says, "It's critical to come in with the lowest -- yet sound and ethical -- valuation possible. If you can get a really low BPO and put that in your offer y9ou have a much better chance."

4. A purchase offer or contract. It's a bird-in-the-hand issue for the lender. A signed contract with a sizable earnest money deposit at a specified price can look far better to the lender than a long foreclosure process, ongoing costs and no guarantee at the end of the road. What's more, lenders will not entertain tentative offers. You're not going to get the chance to ask the bank, "If I could find someone willing to pay X number of dollars, would you approve a short sale?"  "Remember, Geller says, "listings and pending sales and last year's sales are meaningless. It's all about what willing buyers pay willing sellers. If there has been no actual sales volume, there are no comparables, so there is a lot of room for a low BPO when the sales that have occurred were forced, foreclosure sales and everything's for sale but nothing is selling."

5. A settlement statement. To go along with the proposed price, this statement -- also called a net sheet -- details exactly how much the lender will end up with and exactly how much of a loss it will be taking. It includes the purchase price, the closing costs and any other costs or fees involved in the transfer of the property. You can get this prepared by the closing agent or real estate lawyer.

Finding a buyer
Before you even thought about a short sale, you probably had your home on the market, hoping to sell it for even a small profit, pay off the mortgage and stave off foreclosure.

But that hasn't worked -- possibly because you're "upside down" -- you owe more than the house is actually worth today.

While you may now be desperate enough to go for a short sale, you're still seeking the same thing -- a buyer. Some homeowners would like to get a tentative OK from the lender before seeking a buyer, but this doesn't happen in most cases -- the lender won't tell you it will accept any less than what it is owed and also probably won't even discuss this until you're 60 or 90 days behind in your payments. Any lender is more likely to agree if a buyer is already in place and you have a legitimate, signed offer with a sizable deposit.

There are a few things you can do to find a buyer. You can go the "For sale by owner" route with a sign on your lawn and classified ads locally and online. Explain to anyone that responds that you are seeking a short sale arrangement.

Consider, however, a short sale is not a do-it-yourself project, and this is one time you should seriously consider getting a real estate agent who has a track record with short sales, foreclosures and bank-owned properties. Real estate agents often maintain a contact list of investors and buyers in the area. Ideally, you will want to find a buyer who has at least a basic familiarity with short sales or works with a broker who does.

In addition to writing up the hardship letter and documenting the property's shortcomings, you should do everything else in your power to help convince the lender that the property would be difficult to sell via normal channels. Gather up any repair receipts and/or estimates. Take pictures (or allow the buyer to do so) of any problems or defects. Allow the buyer and their broker/appraiser to access the property (inside and out) when necessary.

Important details

• In some cases, the lender may send you a 1099 tax form, which will list the "shortfall" (the amount the lender has forgiven) as income to the seller. Don't be alarmed: The Mortgage Forgiveness Debt Relief Act of 2007 gave short sellers a big tax break by changing the way the forgiven amount was viewed for tax purposes. Prior to passage of the act, that amount was considered as income for the borrower and was subject to tax. However, the new law removed that tax liability.
• If you have more than one mortgage or more than one lender, remember they all have to approve the short sale. Make sure your sales contract includes all lenders' approval in writing. Lenders holding second or third mortgages probably will get nothing if the property is foreclosed, so at least in a short sale they have a chance of recouping some of their investment.
• Some states allow deficiency judgments, in which a lender can pursue the borrower for any remaining balance of the loan. This usually only applies to cases where the home is sold at auction or as an REO, a real estate owned property, by the lender. In a typical short sale agreement, the lender agrees to waive this right. Make certain you're protected from this in the short-sale agreement.

It all comes down to price. Anything will sell if priced correctly. Everyone wants a deal whether it's on cars, vacations, services, food, gas, and yes...homes! As short sale experts, we are pricing our inventory within 10% of market value and experiencing multiple offer situations which in some cases actually drives the price up. So then you might say, Ok the property is under contract, the buyer got a great deal, the seller is saved from foreclosure, and the property is SOLD resulting in a fairy tale ending. Wrong! Much skill, organization, and commitment is needed to take that short sale from contract to the closing table. As with any "next greatest thing", many looking to stay afloat in this turbulent real estate market claim to be experts in the short sale arena. However, this is not something that one "can fake it until they make it!" Well, what about that designation that says they are a CDPE (Certified Distressed Property Expert)? If your family doctor sat through a one day course of brain surgery then he must be qualified, right? (After all, he did stay at a Holiday Inn Express Last Night!) As with any continuing education course, the time spent gives one the idea of the basics, but only with true experience brings continued success. Below is a list of questions that you must ask before you list your property for short sale or you may find your listing tied up for months without achieving your goal of a closed short sale. Perhaps worse, losing the property to foreclosure without even the opportunity to sell.

1. How many short sales have you listed and successfully closed?
2. Could you provide a list of the successfully closed short sales?
3. Would at least 3 of the sellers be willing to speak with me about their experience with you?
4. Would you supply a list of lenders that you have successfully closed shorts sales with?
5. Do you negotiate your own short sales or farm them off to a title company, attorney's office, or some other third party?
6. How often will you follow up with my lender for status on my short sale?
7. Will you communicate with me on all of my status updates and the other Realtor involved (if applicable) or the buyer directly?
8. What will happen if there is PMI on my loan?
9. What if my property is a primary residence?
10. What if my property is not a primary residence?
11. What if my property is a condominium?
12. What are the tax implications?
13. Why should I complete a short sale as opposed to a Dead in Leiu or just let the property go?
14. What will happen to my credit?
15. Will you accept back up offers?

If you are considering a short sale and would like to discuss the answers the questions above or have additional questions, please do not hesitate to contact us. We have a passion for helping people and would love nothing more than to help you!!!

Kristen Kearney

The scenario is playing out all over the country because so many foreclosed homes are rental units bought by speculators before the market fell.

There are also horror stories out there of tenants paying sizable chunks of cash into lease-to-own and lease-option arrangements and then getting thrown out and losing their contributions. Once a home has been seized and the title transferred, all leases and other arrangements made by the previous owner are usually off.

As you've discovered, rental-unit owners or their property-management companies have minimal (if any) responsibility to inform tenants that the home or rental building they control is going into default.

Alas, you may only have a small chance of getting your advanced rent and deposit back -- with any speed, that is. You can certainly take your soon-to-be former landlord to small-claims court, but such redress will no doubt be slow given the owner's financial position.

There's another option. You might offer to assume the loan if it's not too top-heavy or buy the home at a discount in a short-sale arrangement if you can muster up a down payment and have decent credit. Or you could try to contact the lender, who may be buying the house back anyway, and discuss your wishes to remain as a tenant (rarely granted, unfortunately).

If an individual buys the house, you could immediately express your desire to stay and see if something can be worked out. Of course, these approaches are fraught with many "ifs."

Meanwhile, you may have more time in you present rental than you think. If you haven't been named a defendant in the foreclosure and a marshal hasn't served you with a summons and complaint, the bank can't start the process of throwing you out.

At worst, you probably have 30 days after such a notice, but sometimes those proceedings can take months. You'd best call your local county or city housing office to be certain of your rights, which can vary widely. Most times, renters are still obligated to lease terms as long as landlords still hold title, regardless of their financial state.

As for "screening" your next landlord, in itself an ironic role-reversal, a Licensed Realtor can check to make sure the property is NOT in preforeclosure or foreclosure before an offer to rent is made.

Sales of U.S. existing homes rose slightly in February for the first time since July 2007. However, prices posted a record drop from their year-ago level, but economists said it was unlikely the market had reached a bottom.

The National Association of Realtors on Monday said sales of previously owned homes rose 2.9 percent in February to a 5.03 million-unit annual rate, bucking expectations on Wall Street for a decrease.

While the rise broke a six-month streak of declining sales, prices continued to slip. The trade group said median prices fell 8.2 percent from their year-ago level to $195,900. It was the biggest year-to-year drop on record dating to 1968.

The heart of the housing crisis isn't about existing homes sales. The real issue is the millions of American homeowners who have no home equity or are upside down in their homes. For the millions of homeowners who are facing this situation the small up tick in home sales offers little solace.

The pick-up in existing home sales has helped cut into the bloated inventory of unsold homes on the market. NAR said the inventory fell 3 percent to 4.03 million units at the end of February. At February's sales pace that represented a 9.6 months' supply, the slimmest inventory since August but still high by historical standards.

It's important to remember that new home builder's massive inventories of unsold homes is not included in the NAR reports.

"That's not much of an improvement in inventory," said Gregory Miller, Chief Economist at SunTrust Banks in Atlanta. "As long as bank lending standards stay as tight as they have been, it will be a long correction process."

NAR also reported that sales decreased by 1.1 percent in the West, but were up 11.3 percent in the Northeast, 2.5 percent in the Midwest, and 2.1 percent in the South. Nationally, existing home sales have tumbled 23.8 percent over the past year.

by Tim and Julie Harris

A growing number of lenders are approving short sales as an alternative to foreclosure, says Doug Duncan, Mortgage Bankers Association chief economist.

The move is a way for lenders to avoid having to take over and manage property.

"The way banks see it, it's better than if the house goes into foreclosure, stands empty, and sees its value spiral downward before it's auctioned on the courthouse steps," says Duncan, who expects rising delinquencies to spark an increase in pre-foreclosure sales.

Though short sales put additional downward pressure on the national median home price, Fannie Mae chief economist David Berson says they also lower the number of foreclosures and can help ease the housing downturn. Short sales are hard to track, though, because they're not counted, making it impossible to know exactly how many occur.

Source: Bloomberg, Kathleen Howley (03/21/07)

Daily Real Estate News  

The current real estate market also has a zero tolerance policy for properties that are overpriced or not staged properly. That means the buyers will not make an offer. The real estate agents will joke about the functional obsolescence.

The secret about the real estate market is that a properly priced property will attract buyer showings. A correct price and proper staging will cause a buyer to write an offer on the house. It's that simple! Conversely, if the property is not being shown, it's not aggressively priced.

I have a property listed for sale at 250k. The last two comps are 245k. The seller vacated the house, but failed to clean the carpets. The interior of the house is white with a different color accent wall in four rooms. The seller refuses to paint the walls, steam clean the carpets, or lower the price. Oh, by the way, this client can't understand why the house has not sold.

A wise man once said, "When the student is ready the teacher will appear." For over 30 years I have suggested sellers begin by pricing their house 'below appraisal.' Then, slowly reduce the price until buyers appear & an acceptable offer is negotiated. This is a very simple solution to selling a property. Unfortunately, it's not easy due to human emotions that are involved.

It is a buyer's market, and they have zero tolerance for improper pricing, old carpeting, and outlandish colors. Beauty is in the eye of the beholder. Pricing is based on supply and demand. The definition of insanity is to keep the old price, the old paint, and the old carpeting, and hope for a different buyer.

by Paul Pastore

Most major lenders are freezing access to Home Equity Lines of Credit (HELOCs) . Millions of Americans use their HELOCs as their families security blanket to weather any unplanned financial storms. If you were planning on using your HELOC for spring home improvements, medical bills or college tuition, chances are the money has been, or will be shut off.

Most major lenders have been working together in collusion. Behind closed doors, these lenders have created a secret plan to cut off  access to your home equity lines of credit.

You must be aware that the lender retains the right to cut off or reduce your line of credit at their sole discretion.  Lenders are now arbitrarily reassessing properties and then locking out access for homeowners when the lenders believe the property has negative equity.

What can you do about this when you are affected?

Nothing.

From Countrywide, (this is part of a letter sent to home owners):

'Important message about your loan: At Countrywide Home Loans we are committed to helping customers sustain homeownership. As part of the commitment, and in keeping with its sound risk-management and responsible lending practices, Countrywide Home Loan is reviewing and analyzing home equity lines of credit in its servicing portfolio.

As you know, home values in many areas of the country have declined. We believe that the decline in the value of your property, from its original appraised value at the time your loan was made is significant. In accordance with the terms of your Home Equity Credit Line Agreement and Disclosure Statement (Agreement), we have elected to suspend further draws against your account as of the Effective Date above.'

More Than 122,000 Have Already Lost The Right To Borrow From Their Credit Lines And We Are Just Getting Started.

On Friday, the Los Angeles Times reported that Countrywide notified many homeowners they've lost their right to borrow against their credit lines:

'Tens of thousands of homeowners with home equity lines of credit are getting a rude surprise: They've been told by their lender that they can no longer take money out on their credit lines because sinking home prices have left them with little or no equity.

Among the lenders taking such action is Countrywide Financial Corp., which sent 122,000 letters to customers last week telling them they could no longer borrow against their credit lines. In some cases, according to the company, the borrowers are now "upside down"—the total debt on the home exceeds the market value of the property.

Calabasas-based Countrywide, the nation's largest mortgage lender, says it uses computer modeling that factors in changes in home prices to determine which customers will have their money tap shut off.'

Countrywide is not alone. This is a partial list of the Mortgage Lenders who are sending HELOC freeze letters now.

Bank of America - HELOC Freeze

Countrywide - HELOC Freeze

Chase - HELOC Freezes

CitiGroup - HELOC Freeze under review

National City - HELOC Freeze

Suntrust - HELOC Freeze

USAA Federal Savings - HELOC Feeeze

Washington Mutual - HELOC Freeze

If there was any question that consumers were feeling the financial pinch before...just wait until they are told that their homes are worth LESS than what they owe.  In the words of Countrywide..."Significantly Less." What effect will this have on the economy...think this will make consumers feel more confident about housing?

by Tim and Julie Harris

http://www.Edmunds.com    

Do your homework when leasing or buying a new vehicle. It could costs you hundreds if not thousands if you do not. This website was informative, giving reviews and teaching the ins and outs of the car business.

A great tool for sure !!!   

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 or

Want to know what the big moneymaker is for credit card companies?

Fees (read: your money). Last year, 31 percent of the industry's profits came in the form of late-payment fees, over-limit fees and the like.

If you are like the average American family, your total credit card debt is around $8,100. If you were to stop charging altogether and pay only the minimum amount due on this amount, it would take about 30 years to get rid of it.

No one wants to hand over cash to the credit card companies, but by paying only the minimums or falling behind a couple of months here and there, you are lining their pockets with profit and limiting your opportunities for enjoying life.

Bankrate.com to the rescue. Use the "Payment push plan" to methodically dissolve your debts. Here's how it works.

1. No new debt
Put away the credit cards; borrowing is no longer an option. Even when you know you deserve something, you can't have it until you can afford to pay cash for it.

2. It's a head game
A daily affirmation helps to program your mind for success; post this on your bathroom mirror: "By living frugally, we will have the cash necessary to pay off our debts in ___ months instead of ___. The $______ we save in interest will be put into savings so we will always have enough to pay the rent and weather any lean periods in the future."

3. Prepare a debt repayment schedule
Include columns for the name of the debt, balance due, interest rate, current payment and "Payment Push" period.

Rank the debts by interest rate, with the highest one on top. Add a line under each debt to describe how you're going to fund the "Payment Push."

The "Payment Push" gets applied to one debt at a time: Continue to make the same monthly payments on all debts except the one getting the "Payment Push."

4. Start at the top
Apply the "Payment Push" strategy to the debt on the top of the list: All extra, available cash is used to pay down the debt with the highest interest rate, first. That includes raises, bonuses, belt-tightening and that $20 bill that unexpectedly popped up.

Push hard at the rest of them. When the first debt is paid off, use the cash that is freed up to pay down the next debt on the list.

Be on the lookout for new ways to cut costs and bring in more money. The sooner a debt gets paid off, the sooner you can push hard at the next one on the list.

http://www.census.gov/

1. Hire a top-notch sales agent.
"You need a good agent, an agent who knows your neighborhood" says Julie Greenwood, co-owner of Greenwood King Properties, a Houston real estate agency.

2. Price it right.
The No. 1 thing that will sell a house quickly is price. "That's the name of the game," says Tom Innes, president of Re/Max Commonwealth in Richmond, Va. "If you price it right, it will sell. If you price it wrong, it won't sell."

OK, so just how do you play the home-sale-version of "The Price is Right"? That crackerjack agent you hired should have a good sense of what price will help sell your home sooner rather than later. As the owner, you are probably not objective, so give your agent free rein, within reason, to set the price. The broker will look at the average days a home in your neighborhood is on the market, how your home compares to others in the area and its condition.

3. Create an adjustable sales plan.
Come up with a sales strategy, but make sure it's flexible. What's your initial asking price? How long will you insist on it before making a reduction? How much of a cut will you accept? What about after that? Having a plan in place will help you react quickly, according to Greenwood, and will move your home that much more quickly.

4. Clear out the clutter.
"Get the clutter out of it," says Stephen Roulac, author of the forthcoming "360 Housing Mistakes and How to Avoid Them." It will make your home more inviting to buyers. "After you thought you got out the clutter, take out more. Get it spare, open and fresh."

5. Offer incentives.
Incentives can help shorten the sales cycle, but be careful. Agents are divided on how much they help.

"I think it can be a fine line between wanting to sell a house quickly and having it look like it's a fire sale," Greenwood says. If prospective buyers get the idea that you're desperate to sell, they will try to get you to accept a bargain-basement price.

Roulac, however, believes that adding premiums can help speed a house sale. A popular incentive offered purchasers is closing-cost help. You also can encourage your sales agent: Offer a higher commission for a speedy sale or give your broker show tickets, a meal at a fine restaurant or some other perk if the property moves quickly.

6. They buy houses, don't they?
What about those "cash for homes" ads you see on matchbook covers, billboards and late-night TV? Agents say houses sold this way are heavily discounted. You will sell your property quickly, but it will go cheap, probably at a price that really won't make you happy. "If it's too good of an offer to be true, it is too good of an offer," says Re/Max's Innes.

7. Ask for company help.
If you're relocating because of a job change or company transfer, you may be eligible for home-sale help from your employer or a relocation company representing your employer. "Generally speaking, these buyouts are fair," says Todd Thornton, a real estate instructor, consultant and author of "Home Buying Without the BS."

"An appraiser would appraise the property and the buyout would be for the suggested fair market value less a sales fee," he explains. "The company would then put the home on the market with a local real estate professional."

While that's a great deal for the home sellers, Thornton notes that many companies are scaling back on their relocation packages, so it may not be an option.

8. Rent it.
If time runs out and you've got to get out of Dodge without selling your home, consider renting it. Just be sure to strike a deal with the renters so your home will be available for showing. For example, if a home such as yours normally rents for $1,000 a month, offer a discount (say $750) in exchange for the renters making the house accessible for showings to potential buyers.

The downside of renting a house that you're trying to sell is that its condition probably won't be as pristine as you or buyers would like. One way around this problem, says Innes, is to rent with an option to buy. "Let people move in six months and pay rent and then close," he says.

By Jenny McCune

Sometimes the only way to stop a snowballing problem is to go back to the top of the hill and find out what started it.

If you're up to your eyeballs in credit card debt, take a step back and recount your money missteps. Knowing your weaknesses could help prevent you from falling back into the bad credit pit and show you a way out.

According to Gail Cunningham, vice president of business relations at Consumer Credit Counseling Service of Greater Dallas, a nonprofit financial management service, consumers mired in debt make common financial blunders, most of which they can prevent with discipline and behavior changes.

Debt disaster Learn from these mistakes and start paying off your debt.

10 bad habits to break

• Misusing Balance Transfers.
• Not checking credit reports--you can't change them anyway.
• Failure to alert creditors about a fianacial hardship.
• Thinking of "Budget" as a dirty word.
• Using retail store credit cards to make use of discounts.
• Procrastinating on creating an emergency fund.
• Paying bills in no particular order.
• Charging purchases instead of paying in cash or with a debt card.
• Making credit payments late.
• Making the minimum payment only.

Bad Habit No. 1: Misusing balance transfers.
Transferring balances on high-interest cards to lower-rate cards can be an effective technique, but it's easy to make it a good idea gone wrong. Transfer a balance onto a card with a low introductory rate and you can potentially save money on interest if you refrain from charging on it and focus on paying off the balance before that introductory rate expires. But most people continue to charge on the new card and wind up with more debt once the teaser rate expires, says Cunningham. In fact, new purchases may pull an altogether different interest rate. Read the fine print very carefully, and only attempt the balance-transfer maneuver if you can control your spending on the new -- and old -- card.

Try this: If you can't refrain from charging, balance transfers won't get you out of debt. If you're really in the hole, consider getting a part-time job and dedicating your earnings to your debt load. If that's not possible, go back to your budget and cut back on unnecessary expenses such as restaurant outings and cell phone extras. Put the money you save toward paying off your balances. Pay for new purchases with cash or a debit card.

Bad Habit No. 2: Not checking credit reports -- you can't change them anyway.
Wrong. If you have credit cards, pull your credit report at least once a year and check it for errors. Purging your record of inaccuracies can be crucial for getting better interest rates, landing the job you desire and stopping an identity thief from ruining your credit rating. Your credit report also affects your credit score, which determines how high your interest rates will be on future loans. Dispute anything you think should not be there. The Fair Credit Reporting Act allows for the correction or deletion of inaccurate, outdated or unverifiable information, provided that a reinvestigation into the disputed data sides in your favor. Unfortunately, negative but truthful data must stay put. A Chapter 7 bankruptcy filing, for instance, will remain on your credit report for 10 years, a Chapter 13 for seven years.

Try this: You can request one free copy from each of the big three credit reporting bureaus, Experian, TransUnion and Equifax, every year. Why bother? Errors on your report, such as a payment marked late that came in on time, could raise your interest rates, lower your credit score and affect your ability to obtain credit in the future.

If you do find a mistake, send a correction letter to each of the credit bureaus that show the error. Experian allows you to dispute errors online, as do TransUnion and Equifax.

Don't bother with so-called credit-repair clinics that aim to charge you hundreds or thousands to fix your credit record. "Anything you can legally do to repair it you can legally do for free," says Cunningham. Of course, if you're not willing or dedicated enough to write those letters and follow up with the credit-reporting agencies, paying someone else to do it for you may not be such a bad idea. Better to have someone dispute the errors rather than no one. But be extremely careful in selecting such an organization -- try to get referrals and seek out others who have been satisfied with the service.

Bad Habit No. 3: Failing to alert creditors about a financial hardship.
You heard the rumor: Layoffs are coming to a department near you next week.

Don't wait until it happens to worry about how to pay your bills. Do some damage control right away.

Try this: "The best time to negotiate is before the problem spirals downhill," says Cunningham. Call the credit card company and explain the problem you're about to have. Ask if they could temporarily lower your interest rate or extend your payment deadline. Some issuers have in-house help programs that provide such short-term services to customers.

Bad Habit No. 4: Thinking of "budget" as a dirty word.
The word may call to mind tedious self-trickery meant for those with low incomes, but everyone could benefit from deciding on certain amounts for spending, and sticking to the amount no matter what. It also makes sense to budget for known future expenses, such as quarterly insurance premiums, college textbooks and rent. Not saving up in advance means you'll have to charge expenses or cut into funds set aside for necessities. Budget these fixed costs while you can handle small financial pinches.

Try this: To find out what's draining your finances, keep track of where your money goes for a month. Use a spreadsheet, financial software or a pen and paper and categorize your expenses. Doing this will reveal whether you're spending too much on expenses you could trim, such as restaurant outings and gas. Then you can consider cooking at home more often or consolidating driving trips. Cut back as necessary without cutting out expenses important to you. Cunningham suggests that if you enjoy watching TV, but don't tune in to a majority of the 300-plus channels you have, consider cutting back on your cable package instead of cutting out TV altogether.

For a detailed household spending plan, try our home budget work sheet. Or, get help creating a budget with our budget calculator. Plan for future costs by figuring out the total amount you'll owe and divide by the number of months you have until that day, says Cunningham. If you have money due next month, divide by the number of weeks you have and save that amount every week.

Bad Habit No. 5: Using retail store credit cards to make use of discounts.
Chances are, that card carries a high interest rate you'll be forced to deal with if you don't pay off your balance each month.

Try this: If you must charge your purchase, use your general-purpose credit card, says Cunningham. If you can't pay off the balance, at least you'll pay a lower interest rate. Limit the total number of credit cards you have to just two, if you can: one you can pay off each month and one with a low interest rate for those large purchases you'll pay back over time.

Bad Habit No. 6: Procrastinating on creating an emergency fund. Learn to save for financial emergencies. Even if you feel robust and invincible, a single emergency room trip or car accident could force you to put large balances on credit cards, causing interest to accrue and more debt to pile up. "That rainy day will happen," Cunningham says. "It's not a matter of if, it's a matter of when." If your tire goes flat and you can't pay upfront for the replacement, for instance, you're stuck with charging it or reducing funds earmarked for necessities. That's where the emergency fund fits in.

Try this: Maintain an emergency fund of at least three to six months' worth of living expenses, and keep your insurance policies up to date. Work toward that goal by socking away 10 percent of your take-home pay each month in a liquid savings account, says Cunningham. If you receive a raise or bonus, add that money to savings. Since you're not used to the extra cash flow, you won't miss it.

Bad Habit No. 7: Paying bills in no particular order.
While the order may not matter if you can pay all the balances, it will matter if you fall short one month. Say you pay off the balances on your credit cards first, then find you can't make the minimum on your house payment or monthly rent. You've put the roof over your head at risk.

Try this: "Pay for living expenses first," says Cunningham. After the house or rent payment, necessities such as utilities, groceries and medical care should top the priority list. Next comes the car payment -- you want to avoid repossession, obviously. On down the line, secured loans and co-signed debts follow in importance, then unsecured loans and credit cards. "Ideally, everyone can get paid, but if a choice has to be made, paying in this order will do a better job of keeping the home life stable."

Since bills often aren't due in this order, you'll need to work out a payment schedule and set aside money from each paycheck. See No. 9.

Bad Habit No. 8: Charging purchases instead of paying in cash or with a debit card.
How many times have you charged services or merchandise when you had the money to pay with cash or debit? Insignificant purchases of $20 and $30 made several times over can quickly add up, particularly if you already carry a balance. Balances you can't pay off each month mean paying interest charges and, subsequently, more money for items you could have bought outright, interest-free.

Try this: Make a habit of paying for purchases under $50 with cash, debit or check. Knowing that the money has to clear the bank sooner could help curb your spending habits. Just be sure to check your balance regularly to ensure that you have enough funds.

Bad Habit No. 9: Making credit payments late.
After all, it's only a $39 late fee. Besides wasting money you could've put toward the balance, a payment that arrives at least 30 days past due can throw your account into default and triple your interest rate. Plus, other creditors may start charging you a default interest rate as well, thanks to a universal default clause buried in your contract. "Creditors are constantly reviewing your credit activity, and if they see you falling behind with one creditor, even if you have a perfect payment history with them, they can raise your interest rate," Cunningham says.

Try this: On a calendar, mark upcoming paydays and payments that should come out of that paycheck, she says. If you're mailing payments, send them seven to 10 business days in advance. Better yet, sign up for online bill pay. Just check that the address on file and the address on the statement match, or the payment might not arrive on time. If you're still late, call the creditor, explain the situation and ask them to forgive the late fee. Check your credit report and be sure the information shows up correctly.

Bad Habit No. 10: Making the minimum payment only.
Paying the minimum is better than paying nothing, but it doesn't do much to pay off most balances and forces you to keep paying interest. By paying interest on interest, you lose any savings from buying a dress on sale, Cunningham says.

Try this: If you can afford to pay more or in full, go ahead and pay as much of the balance as you can. You never know when you're going to have a tough month. Pay in full every month and you can avoid interest charges altogether.

Or, if paying more than the minimum proves difficult, consider working an extra part-time job or decreasing your expenses -- or both, says Cunningham. Put all of your extra earnings toward the debt. Use our minimum payment calculator to see how much you're saving in interest charges.

By Leslie Hunt • Bankrate.com

The durable argument of whether it's best to buy a new home or older one dates back centuries. And it's never quite been resolved.

For every qualifier, there's a disqualifier. For every "on one hand," there's an "on the other hand."

Homebuilders and old-line real estate sales people might even bicker heatedly about the topic, with their own "Looks-great! Less-fulfilling!'' twist on the old light-beer argument.

The truth is, builders can never fully re-create the nation's quaint old neighborhoods, where every house was built architecturally distinct from the neighbor's. And home buyers will never be able to fully assemble their dream homes the way they can on a vacant lot with a fantaz view.

So the choice between the two is always a relative call, not a dollar-and-cents one, says business author and investment expert Ric Edelman.

"There are many factors beyond economics that drive the decision," says Edelman. "Buying a home should be more of a lifestyle decision, because so much of the economics are beyond your control."

Edelman, who penned such bestsellers as "The Truth About Money" and "Ordinary People, Extraordinary Wealth," has built two family homes over the years and is now fixing up a "resale" he purchased..

"One of the fundamental mistakes that consumers make is a rush to judgment," he said. "They often dismiss a new home or a resale when one is far more appropriate for them than the other."

So how do you decide which best fits your needs and personality?

Below are a few pros and cons in the own-resale debate:

Locale: The oft-recited real estate mantra of "location, location, location" is still relevant. Most older, established neighborhoods are in the town's center, which can be good or bad depending on the vitality of your urban area. New subdivisions -- and newer schools -- are generally on the outskirts. But the expense of a daily commute is one factor that many buyers forget to consider, Edelman said.

Price: Existing homes are usually less expensive per square foot, in part because of escalating land costs in new subdivisions. But ownership costs are considered more predictable -- almost inevitable -- in a new home, especially considering the cost of a code upgrade or remodeling of a vintage home. Some builders will include closing costs as part of their price of a new home, although that builder has a set amount he must get from that home to make a profit. Price is more readily negotiable for an existing home. Also, a hidden cost in many new subdivisions is a homeowner's association, with mandatory fees and other assessments as well as architectural controls that may surface at remodeling or expansion time. Do your homework.

Move-in complications, advantages: The resale is sitting there waiting for occupancy, warts and all. But the wait for a new home can seem interminable, though the buyer can check on quality control as it's being built. If your finished house is among the first in a new subdivision, prepare to navigate through construction teams and precariously misplaced nails for months on end. And don't forget that daytime hammer serenade.

Neighborhood: "People moving into new neighborhoods are more homogeneous -- the same things that appeal to you also appeal to others like you," says author Edelman. "When a development goes up, it offers an opportunity for you to help create your own neighborhood lifestyle. If you want to move into community where your children have lots of playmates, that may be for you." In an older community, he said, people have moved in and out over the years and you tend to get more diversity of neighbor backgrounds that include older people, singles, families and renters.

Living space and design: Lower building costs of the past mean more home for the money for the buyer of a resale. Resale basements may have been finished out nicely for additional living space. On the other hand, new-construction homes often employ more efficient, innovative uses of square footage and property. Also, newer "zero-lot-line" developments offer more living space per square foot than a same-size lot that surrounds a resale.

Customization: In a new house, you can pick your own color schemes, flooring, kitchen cabinets, appliances, custom wiring for TV's, computers, phones and speakers, etc., as well as have more upgrade options. Modern features like media rooms, extra-large closets and extra-large bathrooms and tubs are also more attainable in ground-up construction. In a used home, you rely largely on the previous resident's tastes and technological whims, unless you plan to farm thousands into a remodeling and rewiring. Be warned: It's unwise to wallpaper for at least one year in a new house until it settles, says Edelman. The wallpaper will tear. (But it is OK to paint.)

Character: While many new homes are built in "contextual" style, which blends elements of the old and the new, it's still hard to emulate a pre-Civil War house in New Orleans, a Victorian home in San Francisco or a brick Row House in Boston. Hardwood floors, vaulted windows, high ceilings, built-in cabinetry and other design nuances express a certain individuality in older homes that's nearly impossible to copy. Many new-home buyers believe they put the character in their own homes.

Safety: Builders have to follow very strict guidelines in new-homes and additions, especially in the West and Northwest, where earthquake safety standards must be observed. In general, new homes are usually more fire-safe and better accommodating of new security and garage-door systems.

Landscaping: Mature trees, robust shrubs, gardens, rose bushes and perennially well-watered lawns are some of the rewards of an older home, while most new homes are apt to yield wee trees, fewer walkways and sparse vegetation. Landscaping is an expensive proposition today for the cost-conscious home builder.

Energy efficiency: Advantage: new construction. Game, set and match as well. New-home designers can use new building materials such as glazed Energy Star windows, thicker insulation and other technology that will lower future energy costs for the owner. Most states now have minimum energy-efficiency requirements for new construction. Kitchens and laundry areas in new homes are designed to house more efficient energy-saving appliances. Older homes, unless they have undergone an energy retrofit, usually cost much more per square foot to air-condition and heat.

Amenities: Many new subdivisions offer neighborhood clubhouses, swimming pools, playgrounds, bike and jogging trails and picnic venues for residents. Older homes don't, although many have better access to urban shopping venues and restaurants because they're part of old, self-containing city-planning philosophies.

Maintenance: The charm of an older home often goes hand in hand with increased maintenance, especially if the previous owner(s) were not vigilant in upkeep. Building materials may be harder to replace or match in an expansion or remodeling. New homes generally come with at least a one-year warranty for the repair of some problems that develop as it settles into its foundation. But know what your warranty covers. Many are elusively written.

Taxes: Newer homes tend to spring up in less-developed, outlying municipalities, which may impose higher taxes on you because they're subsidizing fewer inhabitants than the central metropolitan area. Your community will still need fire and police coverage, sidewalks, sewers and probably a new school. A more established home in a built-out area has a little more predictable tax structure.

Increasingly, "new" is no longer an option in some towns, and neither is "old" for most folks there. Realtor Graham Baxter of Los Gatos, Calif., operates in the Silicon Valley market, where most of the sales are $1 million plus and there is virtually no new housing stock. "The only new homes that tend to get built are the result of tear-downs," he said.

To find new subdivisions and less expensive homes in the region, "You have to go 50 miles from the Valley to Tracy or Stockton. But you'd be surprised how many people make that commute."

Compromise is obviously the name of the new-or-resale home-buying game, as it becomes apparent that the perfect house and perfect site probably don't really exist. And finding what you want can be a protracted headache.

"Buying a home from anybody is much more complicated and challenging than people realize," says Beau Brincefield, real estate attorney and author of "Brincefield's Guide to Buying a Home; The Twenty-One Biggest Mistakes People Make When Buying a Home."

With new-construction homes, "You've got all the same problems you have with resale homes and then some," says Brincefield, who is a frequent lecturer on real estate and civil litigation. Brincefield says dozens of Web sites are created by people who bought defective new homes from builders but who have since discovered they have little recourse. "Obviously, there are a lot of good builders who stand behind their homes...and most people go through this process with no problems," he said. "But those aren't the ones I see."

Some builders create no-asset, limited-liability companies in order to buffer themselves from claims, he said. Home warranties, especially those purchased from third-party warranty companies, usually aren't as all-protective as consumers first believe. Read the fine print, Brincefield advises.

When considering purchase of a new home, make certain you are dealing directly with a builder who has a substantial net worth and not a no-asset subsidiary, he said. Avoid giving builders upfront money, he says. "If they have your deposit and go under, you won't get either the house or your money back. Make sure the purchase contract is contingent on financing."

Whether buying a new or resale home, always hire a properly credentialed individual to inspect the premises before you settle, Brincefield said. "Even some nationally known home inspection firms may send out an individual inspector who is minimally qualified to perform a good inspection."

Because of the contract forms that many inspection firms use, the company typically has little financial risk for a poor inspection, Brincefield warns. "If they miss a bad roof, all they have to do is refund you the $200 or $300 (fee). Anytime you are given a written contract to sign, you should read it carefully and make sure you understand what you are signing."

Buying a new or resale home without an experienced real estate attorney "is like playing Russian roulette," he said. "Sure, there is only one bullet in the chamber, so you're probably going to make it out all right. But there's always that one bullet."

Potential buyers should also scope out any vacant fields in the area surrounding their planned purchase and check with the city or zoning board to determine how that land is zoned, experts say. Recent buyers into both new and established subdivisions across the country have been stunned to discover the long-fallow retail parcel down the block will soon give way to a big-box retail megastore.

Because they like the customization options, first-time home buyers will sometimes opt for a new town home instead of a resale, with intent to move up to a single-family home in a few years, Edelman said. But that means the same builder, who will probably continue to build new units nearby for the next few years, will in essence determine the future value of that town home. That means the selling price for the owner of the town home could be tied to -- or just below -- the price of that newer town house the builder is still constructing.

While buying a used or new home should be largely a lifestyle decision, that still shouldn't prevent the potential buyer from also thinking like a seller, Edelman said.

"For you will be one someday," he said.

By Steve McLinden • Bankrate.com

When you make the decision to sell your home, you are under no obligation to hire a real estate agent or broker to help you with the sale. Nonetheless, most people prefer to hire a real estate agent in order to better protect themselves. And, it also puts them in a better position to successfully sell the home in a short amount of time.

When you hire a real estate agent, you gain access to a wealth of knowledge that can help keep you out of trouble and will help provide for a smooth transaction. Here are just a few things your real estate agent knows that you probably do not.

The Federal Fair Housing Act

According to the Federal Fair Housing Act, you cannot discriminate against someone when selling a home. The act defines seven different classes of people who are protected against discrimination. These include:

• race
• color
• national origin
• sex
• religion
• handicap
• familial status

If you do not enlist in the help of a real estate agent, you put yourself at risk of violating this act if you refuse to sell your home to an interested buyer who may be in a protected class. In addition, you might even accidentally violate these laws without realizing it. For example, there are certain words that cannot be included in your advertisements for your home because they are in violation of the Fair Housing Laws. Some of these words include:

• bachelor apartment
• children welcome
• couples
• gentleman's farm
• golden agers
• handicapped
• integrated
• married
• mature
• mother-in-law quarters
• professional
• seniors
• singles only
• sports-minded

As you can see, some of these terms seem perfectly innocent. Therefore, it is a good idea to get the help of a real estate agent so you can tap into his or her knowledge and experience in order to stay out of trouble.

State Real Estate Laws

Although there are similarities in real estate laws from one state to the next, each state has its own set of rules that must be followed. If you do not understand these laws, or are unaware of these laws, you can inadvertently break the law when selling your home. In addition, by not being fully aware of your seller's rights, you might actually lose out on money during the transaction.

Taking Advantage of Connections

Aside from legal matters, a real estate agent simply has a vast number of connections making it possible to sell a home more quickly and for a higher asking price. Similarly, because people come to real estate agents when searching for homes, you are able to tap into a much larger market of interested buyers when you get the help of a real estate agent.

Because a real estate agent has experience with selling homes, he or she can also provide you with tips to help increase the market value of your home and to make the process go by more quickly. For example, small things such as painting a room a different color can go a long way when it comes to increasing the appeal of the home. By taking advantage of the agent's expertise, you just might have a much more profitable selling experience.

by Eric Bramlett

If you're thinking about buying a house or a car, your credit score is a very important number.

The interest rate you'll pay for the money you borrow will be determined, in large part, by this three-digit number that's generated from the information in your credit report.

Most lenders have carved-in-stone rules about handing out the best terms, and those rules almost always place a major emphasis on your credit score. If their best rates are offered to borrowers with a score of 700 or higher and yours is a 698, those two points could cost you thousands of dollars.

According to www.myfico.com, the consumer Web site of the Fair Isaac Corp. that created the FICO score (the most commonly used credit score), the interest rate difference between those two scores is about one-third of a percentage point.

On a $165,000 30-year fixed rate mortgage, that third of a point could cost you more than $11,172 in interest charges, assuming 629 percent is the lowest rate available. Fall below a 660 and the rate goes up another .81 percent.

Keep in mind that these are averages. Most lenders today practice tiered pricing, with interest rates rising as scores go down. Each lender chooses its own "break points" between tiers. Lender A may bump up the interest rate if a score falls below 700, while Lender B doesn't charge higher rates until the score is 690 or below. So if you stick with one lender, and that lender's break point is 700, raising your score from 698 to 701 can be vital.

This underscores the importance of not only doing all you can to improve your score, but shopping thoroughly when looking for a mortgage. From the perspective of a mortgage broker, who can choose among a sea of many lenders, there are no sharp break points. Consumers should do what a good broker does -- look for a lender that offers the best rate for a specific score.

But that's jumping ahead of ourselves. First things first: You can take steps to improve your credit score. The number of variables that play into an individual score make it impossible to say that one particular action will increase a given score by a certain number of points. But there are some good guidelines.

"The mantra for getting a great score is pay your bills on time, keep account balances low, and take out new credit only when you need it," says Craig Watts, consumer affairs manager for Fair Isaac Corp.

"People who do that faithfully have very high scores. It usually means you're being conservative and cautious about credit. It's not a toy and it shouldn't be a hobby."

Speedy upgrade
That's good advice, to be sure, but these actions take a long time. What if you're house hunting and you just need a few extra points to bump you over the line to the great rates?

Start by pulling your credit report and your credit score to see where you are. To get an estimate of your credit score, check out our Credit Score Estimator. If your score is above a 760, you're golden. Improving your score from 760 to 800 won't get you better terms.

What you're looking for on your report are factors that could be affecting your score. Look for errors in the report, such as accounts that aren't yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldn't be reported any longer (negatives are supposed to be deleted after seven years, with the exception of bankruptcies, which can stay for as long as 10 years).

After repairing errors, the fastest route to a better score is paying down balances on credit cards, says Watts.

Though it's not an instant cure, paying down credit lines over a two month period can boost your score a substantial amount, and may be enough to put it over the edge if you're lurking just beneath the next tier of loan pricing.

Had a few late payments in your past?
Even if you've paid your bills late in the past, you can improve your credit score by paying every bill on time from now on, says John Ventura, a consumer law attorney and author of "The Credit Repair Kit."

"Forget about grace periods," he says. "If you want to have a really good record with the credit agencies, pay your debt before it's due and keep your balances low."

A big no-no
One thing you shouldn't do if you're just trying to boost your score is close unused accounts, Watts says.

"If someone tells you to close unused accounts to improve your score, they're pulling your leg," he says. "It won't help you and it can hurt you."

Closing unused accounts without paying down your debt changes your utilization ratio, which is the amount of your total debt divided by your total available credit.

"You appear closer to maxing out your accounts," he says. "That's why your score can drop. It doesn't mean people shouldn't close them, but don't close them to improve your score."

If you do cut up cards, though, leave the oldest one open, says Steve Rhode, former president of Myvesta.org, a national nonprofit financial crisis center.

The length of your credit history is another factor in your score. If you close the account of the credit card you got when you were a freshman in college and leave open the ones you just got within the last couple years, it makes you look like a much newer borrower.

"Keep a couple of the oldest open; I don't care what the interest rate is," he says. "Creditors don't care what the rate is."

Working with credit card balances
Another strategy for bringing up your score: Transfer balances from a card that's close to being maxed out to other cards to even out your usage, says David Chung, managing director for Maryland-based CreditXpert Inc., which provides credit tools to lenders. Or just spread out your charges between a few cards.

"Try to get the usage on all of them at 20 to 30 percent instead of a bunch at zero and one at 80 percent," Chung says. "You're not spending less, you're just shifting it around to different cards."

It could work, Watts from FICO says. "Transferring the balance to a card with a lower utilization could help," he says, "but it's much better to actually pay down the debt if you have the cash kicking around."

If you're really into finessing the system, check your credit report to see what day of the month your creditors send updates on payments to the credit bureaus, Chung says. They're rarely on the same cycle as your payment due date. That's why you can pay off your card every month and your credit report will show you carrying a balance. Then, make your payments several days before the reporting date.

All of these strategies generally take at least 30 days because lenders don't report payments more than once a month.

Rapid rescoring
If you're in the throes of qualifying for a mortgage and need a score boost in a hurry, you can speed the process along with rapid rescoring. If you've got legitimate negative information on your credit report, such as late payments or accounts in collections, you're out of luck. But the process of rapid rescoring can help increase your score within a few days by correcting errors or paying off account balances.

You can't do this one yourself; you'll need a lender who is a customer of a rapid rescoring service. Generally, the service will run roughly $50 for every account on your credit report that needs to be addressed, but it could save you thousands on your loan.

If a consumer can find a lender who is a customer of a rapid rescoring service, new information can be posted within 72 hours, Watts says.

Some nifty online tools are available to find out which strategies could have the most impact on your score. Fair Isaac's www.myfico.com site offers a credit score simulator when you purchase a credit score. It offers seven simulated scenarios, such as how paying down your account balances -- or not paying any of your bills on time this month -- would affect your score.

CreditXpert's "What-If" simulator lets you play with several variables, such as buying a car, paying off a student loan and opening a department store account, all at the same time. They don't sell the simulator directly to consumers, though. 

The bottom line, the experts say, is that you're not powerless when it comes to your credit score.

"There are a lot of things you can do to improve your score," Chung says. "You need to understand what your credit is like now and what's influencing your score today. Then you can take an objective look at the different options available."

Sellers beware of real estate sales people that over value your property and discount their commissions in an attempt to acquire your listing!!! Let's go back to the old adages, "If it seems to good to be true, then it probably is!" and "you get what you pay for". Let me explain: As everyone knows we are in a buyers market and sellers must be highly competitive to accomplish their goal. This certainly is not the market to test the waters nor is it the market for the "We don't have to sell, We just want to sell" Sellers. With listings in Palm Beach County at an all time high of over 15,000 to include many bank owned foreclosures, preforeclosures, and short sales (see what is a short sale blog), prices are being driven downward each and every month. Unfortunately, this is affecting everyone in every price range. This is the simple law of economics, Supply and Demand. Simply put, the number of properties far exceeds the number of buyers. So if you are a serious seller and must sell your property you must compete for the buyer.

A property owner hires a real estate professional to give guidance, to consult, and ultimately perform their skill successfully. However, there is good and bad of everything. Some salespeople will tell a seller whatever they want to hear to acquire their listing instead of being honest and informing the seller of the truth in fear of not getting the listing. Dishonesty will only cause harm in the end. To the saleperson and to the seller.

Real estate commissions: Traditionally half of the total commissions paid to the broker are to compensate the Realtor that brings the buyer. (Can't discount there, with most listings offering 3-3.5%, why would an agent show a property that is offering 2-2.5% when don't have to? Why would they? If they know that they are going to do the same amount of work and they would be compensated less! Apply that concept to your own job. If one day the boss said we are going to pay you less this week to do the same amount of work as you did last week. You may just start looking for a new job) The other half is paid to the listing broker and is divided as follows; marketing costs (definitely can't discount there. Who would see your property if it is not visible to the public? What if there was a 5 bedroom, 3 bath house, on a lake, with all the upgrades one desires priced at $100,000, but no one knew about it?), brokerage fee (can't discount there. A highly recognized national brokerage with national relocation network and knowledgeable, well educated staff is crucial), Real estate agent's profit (no one will will work for free. Would you want a discount surgeon? No, you want a skilled professional that has an excellent track record and settles for nothing less than exemplary service!)

First and foremost, your property must be properly marketed by a competent Realtor/Broker. (see 10 questions to ask on our homepage) This will include professional quality photos, an abundance of internet exposure~as over 75% of buyers begin their search on the internet~, and a network of past clients and business affiliates that your professional has on their team.

Next, the issue of over pricing a property. Pure and simple, if the property is overpriced less buyers will view it. Which in turn decreases your chances of the "perfect" buyer walking through the door. If the property is drastically overpriced, do not expect too much to happen. You will be very lucky to get anyone to view your property. On the bright side for motivated sellers, all those unrealistic prices are helping to move their properties that are priced properly and competitively.

The bottom line is if you are a seller and you are not competitive, your property does not stand above and shine in the sea of properties for sale in Palm Beach County, then you might just accept the fact you are going to stay. If you do need to sell, it is in your best interest to do so now rather than later to capture the maximum net proceeds. There is currently about a five year inventory that is growing each and every day. More houses, more competition and lower prices. Massive amounts of inventory must be absorbed before prices will increase. It is going to be awhile until the next sellers market.

Kristen Kearney

Thursday, October 11, 2007 -

WASHINGTON, D.C.- Conditions in the mortgage market are improving for consumers, which should help to release some pent-up demand in early 2008, according to the latest forecast by the National Association of Realtors^®.

Lawrence Yun, NAR senior economist, notes that widening credit availability will help turn around home sales. “Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,” he said.

Yun said it’s important to place the current housing market in perspective, and that 2007 will be the fifth highest year on record for existing-home sales. “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year – a lot of people are, in fact, buying homes,” he said. “One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”

He emphasized all real estate is local with naturally large variations within a given area. “Markets like Austin, Salt Lake City and Raleigh have been outperforming recently and will continue to do well next year,” Yun said. “Other areas like Denver and Wichita will likely move up in the price growth rankings due to very positive local economic developments.”

Existing-home sales are expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006; a recovery for new homes will be delayed until next spring.

“A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,” Yun said. Housing starts, including multifamily units, are likely to total 1.37 million in 2007 and 1.24 million next year, down from 1.80 million in 2006.

NAR President Pat V. Combs, from Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, said, “Housing is still a good long-term investment, and we’ll be seeing a broad, modest improvement in home prices in 2008. With widely varying conditions, the best advice for consumers is to consult a Realtor in their area to learn about local market conditions because supply and demand can change from one neighborhood to the next.”

Existing-home prices will probably slip 1.3 percent to a median of $219,000 in 2007 before rising 1.3 percent next year to $221,800. The median new-home price should drop 2.1 percent to $241,400 this year, and then increase 1.0 percent in 2008 to $243,900.

The 30-year fixed-rate mortgage is expected to average 6.4 percent for the next two quarters and then edge up to the 6.6 percent range in the second half 2008. Additional cuts expected in the Fed funds rate will help to keep mortgage interest rates historically favorable.

Growth in the U.S. gross domestic product (GDP) is estimated at 2.0 percent this year, below the 2.9 percent growth rate in 2006; GDP is likely to grow 2.7 percent next year.

The unemployment rate is forecast to average 4.6 percent this year, unchanged from 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income will probably increase 3.6 percent in 2007, up from 3.1 percent last year.

• When the borrower receives a bankruptcy discharge and the deficiency was included in the bankruptcy
• When the borrower is insolvent at the time of the cancellation of the debt. Insolvency would occur when a borrower’s liabilities exceed assets. Note that seller would have to prove this insolvency to the IRS when filing a tax return.
• When the debt was secured by a nonrecourse loan. Under a nonrecourse loan, the lender does not have the legal right to collect a deficiency judgment from any assets of the debtor not pledged to secure the loan. While most home mortgages are do not fall into this category, purchase money loans on a person’s residence are nonrecourse in some states.
• When the tax liability from the cancellation of debt on an investment property can be offset against other business liabilities and expenses. This exception does not apply to properties occupied as a residence by the mortgagor.

If you can no longer make your mortgage payments and your home is now worth less than you owe on it, foreclosure may not be your only option.

While there are some significant negative consequences to a short sale, an ever-increasing number of properties are being advertised with that label, says Natalie Lohrenz, director of counseling for Consumer Credit Counseling Service of Orange County in Santa Ana, Calif.

"A lot of people in the last couple of years have just stretched themselves to the limit and you have people with mortgage payments where even when they got the mortgage, the payment was half their income or more," says Lohrenz. "Now that rates are adjusting, it's two-thirds or three-quarters of their income and it's just not possible."

While it may seem surprising that lenders would agree to accept less than what they are owed, they benefit from the process, as well.

"The lender benefits by not having to go through the protracted process of foreclosing on the borrower and then having to put the property on the market and go through the whole marketing process," says Stuart Wilson, a real estate agent with Paragon Real Estate Group in San Francisco.

A market saturated with foreclosures can cost lenders billions -- as much as $50,000 per foreclosure -- according to a study released earlier this year by the Joint Economic Committee.

A buyer's dream
For a buyer, a short sale is a boon since he or she is getting a property at a reduced price. However, the process of waiting for a lender to decide whether to agree to a short sale could make a lengthy home buying process even longer and more arduous.

Wilson, who has represented both buyers and sellers in short-sale deals, advises working with an agent who's familiar with short sales. He also suggests that buyers looking to negotiate a short-sale deal come armed with enough documentation to convince the lender that settling for the lower price is their best option.

"You'd better be armed with recent comparables that show unequivocally that the lender's price is out of line," says Wilson. "You can't do this with a cover letter or a conversation. It will need to be done with the kind of documentation that an appraiser would come up with.

"When you go into a short sale, you have an institutional lender and it is an anonymous entity," Wilson continues. "You don't get a chance to talk to these people, you don't know what their guidelines are, you don't know what their time frames are and you don't know if your contract will be approved in six weeks or six months. It's a real crapshoot."

Lenders are most concerned with the financial situations of the seller when they ultimately make their decisions. If a seller can handle the mortgage payment, there's no motivation for the lender to let the seller out of the mortgage at a lower price.

"A lot of lenders aren't even going to consider a short sale unless it seems like (the homeowner) is in financial distress," says Lohrenz.

Also, if the home has a second mortgage with another institution, a short sale is less likely to be approved since that second institution would have to agree to forfeit all or part of the money it's owed.

Last gasp only
While getting a lender to agree to a short sale may seem like an answer to the prayers of homeowners who want to unload a house, it's not a good move if you're merely looking to find a new place. It's generally a last-ditch effort when the only other option is foreclosure.

Should you go for a short sale? It depends on how deep a financial hole you're in and how likely it is you'll be able to overcome those financial difficulties.

"If they're just having a short-term problem -- short-term disability or maternity leave or layoffs, but they have good prospects to find something soon and they can weather the storm and hold onto the profit through that -- obviously they wouldn't want to think about a short sale," says Lohrenz.

"But if the choice is foreclosure or short sale, generally a short sale is going to be a better idea."

Before you think about asking your lender to consider a short sale, it would be a good idea to get your paperwork lined up.

Be ready to document your need and to show the lender you are serious about your situation, including a hardship letter (an honest explanation of your financial situation and how it occurred), pay stubs, bank statements, tax returns, an appraisal and documentation of your debts.

3 critical safeguards
If you're considering a short sale, experts advise you to take the following steps to meet potential negative consequences head-on.

"If they owe $300,000 on the house and the short sale is for $280,000, is there any possible way that the lender's going to come after them for the $20,000?" Lohrenz says. "Most lenders will put that in the agreement that they're not going to come after the deficiency."

Protect your credit rating. Ask the lender how it will report the short sale on your credit report.

"Most of the time, a short sale shows simply that a debt is satisfied," says Lohrenz. "But theoretically, a short sale could reflect on the credit report as 'settled for less than the full balance.'" Such a designation is a negative mark on your credit report, though it wouldn't hurt your credit as much as a foreclosure would.

Get professional tax advice. Short sales often have tax repercussions since lenders can claim the forgiven debt as income that they provided you.

That means if you agreed to a short sale for $50,000 less than what you owed the lender, the lender could issue you a 1099 for $50,000, which you would have to pay taxes on.

But there are two "outs," says Lohrenz. "If you meet the IRS's definition of insolvency at the time the debt was forgiven, then you generally don't have to pay taxes on it."

Or, if your home loan is a non-recourse loan, you're also likely to escape this tax. With a recourse loan, whoever signed the note is personally liable for the debt, and in a short sale, the debtor would have to pay tax on the difference. A nonrecourse debt is one secured by the loan collateral -- such as the house itself -- and the debtor would not have to pay tax on the sale shortfall.

The most common case is that mortgages secured by the property -- especially for buyers who made a 20 percent or more down payment -- is a nonrecourse loan. But it is absolutely critical you consult a tax attorney before you make such a move to ensure that you don't dig a deeper financial hole as a result of the tax situation.

By Tamara E. Holmes • Bankrate.com

The most popular final directive in many a last will and testament reads: My estate shall be divided equally among my children.

But what happens when most, if not all, of an estate's assets are real property, most commonly the family home? How do you divide that three ways?

In a best-case scenario, the siblings would agree unanimously on a fair and equitable settlement: Sell the home and split the proceeds, distribute other assets so one heir retains the property or negotiate buyouts for those wanting cash.

But best-case scenarios can be as elusive as family harmony when the second parent dies, according to Katherine Tennyson, chief probate judge for Multnomah County in Portland, Ore.

"If there is more than one sibling, you usually have very different ideas about what should happen to the family home," she says. "What is stunning to me is that the resentment that has been building over time in a sibling group really comes out after Mom and Dad aren't around anymore. Then people are looking for payback."

Willed family homes Even if there's no acrimony among family members, an executor can make plenty of missteps, legal and otherwise. Here's what you need to know.

1 The executor job is not easy 2 Wait for court order before acting 3 The main job: maintain and organize 4 Beware of homestead exemption 5 Seek an equitable, fair solution 6 Shortcuts, good and bad

Executor job not easy
Determining the fate of the family home when both parents have passed can be the most knotty and explosive issue an executor -- also called a personal representative -- will face in executing the terms of a will.

In addition to refereeing what discord exists among siblings and other heirs, you'll almost certainly have to go through regular probate to transfer the deed unless the change of ownership is provided for outside the will via a living trust or similar instrument. A simplified or summary probate that's faster and cheaper is only allowed for "small estates" in most states.

"The dollar limit (for summary probate) varies a lot by state, from just a few thousand dollars up to about $200,000," says attorney Mary Randolph, author of "The Executor's Guide." "If you're going to liquidate a house, you're probably over because it is based on the value of the entire estate."

Retaining counsel is advised, and frequently required, when entering probate, especially if real property is involved or you are unfamiliar with the probate process.

"When you are put as the head of the estate, you have some serious responsibilities and liabilities," says Jonathan Alper, an estate attorney in Heathrow, Fla. In the case of a house, you must maintain the house, keep it insured, make repairs. If you let the insurance lapse and something happens, the executor can be personally liable for negligence."

Because we may only be an executor once in our lives, few of us get any good at it.

Here's what you should know about the particular challenges the family home presents to the executor of an estate:

Wait for court order before acting
Doing anything with estate assets, much less selling a home, before you've been granted authority to do so by the court is one of the biggest mistakes an executor can make.

"The biggest issue is people who make decisions they ought not to be making and take money that doesn't belong to them," says Tennyson. "This includes mixing estate money with personal money, borrowing from the estate or distributing money before ordered to do so by the court. Those are all things that you just shouldn't do, but it gets tempting when you're sitting there with this large bank account."

This is particularly difficult if you have been living with and caring for your parents and their money. Once they're gone, their estate, including their bank accounts, becomes a separate legal entity with its own rights. Be sure to respect that line as executor or you may be liable for misappropriations and inappropriate distributions.

Don't even think about posting a "for sale" sign in the front yard just yet.

"There are certain things you can't do as a personal representative without getting approval from the court, and selling a piece of real estate is one of them," says Tennyson.

The main job: maintain and organize
Once the will is ruled valid and the executor is selected, several steps follow. You'll be asked to identify and take an inventory of assets and outstanding debts, notify named parties and creditors, and arrange for maintenance of the home until its fate can be determined.

As executor, you have an obligation to maintain the value of the assets in the estate. Expenditures you make from the estate to clean out the house and pay the ongoing mortgage, insurance, utility and maintenance bills are appropriate and will pass court scrutiny on your interim or final accounting. However, a new swimming pool, a $50,000 kitchen remodel or other upgrades almost certainly will not.

"Generally, your prime directive as an executor is to keep things from losing value," says Randolph. "It's not like you're a trustee and you're investing to increase the value of the assets. You just don't want to mess up."

Beware of homestead exemption
In a handful of states, including Florida, Iowa, Kansas, South Dakota and Texas, you may be prevented from using estate assets to maintain the family home. Why? Every state has a homestead exemption that seeks to protect the primary residence from creditors, not to be confused with the homestead tax exemption that lowers your property tax bill.

Most states have a dollar cap on homestead exemption; those named above do not. Primary residences in states with unlimited homestead exemption generally are transferred outside of probate and are not considered part of the estate. Vacation homes and other real estate holdings generally remain part of the estate, however.

That means that if your state's homestead exemption is $50,000 and your second parent died $75,000 in debt with no other assets, creditors could attach liens to the home to recover the $25,000 above the exemption.

State laws vary widely and contain many exceptions to the homestead exemption, so it's best to consult an attorney for details. Suffice to say, you should tread carefully when spending estate money on the old family home.

"Essentially, it's going to be your home because you're the heir," says Alper. "The creditors can't get it, but you can't ask the creditors to diminish the estate assets that they can recover upon to fix your house."

Seek an equitable, fair solution
When a family home is involved, you will likely need a probate court order to sell the house or transfer the deed. In most states, you also will be required to notify all heirs and other interested parties if and when you plan to sell.

And you'll be required to get an appraisal before proceeding with a sale. Remember: It's your fiduciary duty to get a fair market price.

"You can't just sell it to your brother-in-law," says Randolph. "(The transaction) has to be at arm's length and you have to have documentation for why you sold it for a certain amount."

Deciding the ultimate fate of the family home is the tough part, says Ralph Neuzil of Neuzil, Sanderson, Sigafoose & Flynn in Iowa City, Iowa, who has been an estate attorney for 50 years.

"What do we do if everybody wants the homestead? Or if nobody wants the homestead? Anyone can agree to anything as long as they want to. It's when somebody thinks they're getting the short end of the stick that they cause trouble," he says.

Some common scenarios: One sibling has lived in the home taking care of the parent and wants to stay, but can't qualify for a mortgage to buy out the others. Or the caregiver may have a financial windfall from the deceased outside of the will -- perhaps in jointly held property, bank certificates or as the life insurance beneficiary -- that causes dissension among siblings, who then resent having to give him an equal portion of the estate. And sometimes a sibling with greater wealth will have an unfair advantage to acquire the home in a court-ordered auction or sale.

Unless a single heir is named to inherit the home, the siblings are free to work out any sort of mutually agreeable solution. If cash is an obstacle, for instance, they might even consider payments over time.

But once they agree on a plan, they will still need court approval before distributing the assets. "In my 50 years of experience, when a family agreed on something, I have never had the court deny it. Ever," says Neuzil.

On the other hand, if the family can't agree, tempers and legal fees tend to rise exponentially.

"My old law professor used to tell heirs that if you don't get along, your lawyer will become an heir to the estate, which was probably not the intent," Neuzil says.

What often follows when heirs reach an impasse is a partition action, whereby heirs who want to sell the home file suit to force its sale against the wishes of those who want to keep it. Says Neuzil, "That's one of the meanest, most gut-wrenching, tear-shedding actions of all."

Shortcuts, good and bad
Settling an estate when the family homestead is involved can take a minimum of six to nine months even if all parties are in agreement, and longer if they aren't. Neuzil just closed an estate that began more than three years ago.

To streamline inheritance of the family home, several states recently adopted what is called a transfer on death deed that, in essence, enables the homeowner to provide for the transfer of ownership so heirs can avoid the probate process. Better still, it's revocable as long as you live.

In addition, the beneficiary of a transfer on death deed -- also called a beneficiary deed -- receives a step-up in cost basis to the fair market value of the property on the date of death, which is how inherited property normally transfers. For example, let's say that Ed inherits Dad's house. When Ed eventually sells the home, for the purpose of calculating capital gains taxes, his cost would be equivalent to the home's value at the time of his dad's death.

One tempting alternative to the probate battle is having the parent simply deed the parental home to an heir while he or she is still able.

"That's a bad idea," Randolph says. "For one, what if you change your mind? It's been known to happen. Families have falling-outs.

"No. 2, gift taxes. It's certainly going to be more than the $12,000 annual exclusion for the gift tax, which means you'll have to file a gift tax return. And what if the kid you give it to gets divorced or goes bankrupt? The fact is, you could lose the home."

You also have to consider the tax implications. The child to whom the property is gifted before the parent passes away generally doesn't get the advantage of a full step-up in cost basis. That could mean a larger tax bill if the child eventually sells the house.

So what should you and your remaining parent do if you want to keep the home in the family and avoid probate? The prudent course is to use a living trust or a transfer on death deed if it's available in your state.

By Jay MacDonald

Keys to lower closing costs

· Ask for a justification for each lender-charged fee.

· If the lender charges an application fee, ask if it will be credited toward closing costs.

· If the lender charges an underwriting fee as well as a processing fee, ask for details of those services. Maybe you'll find a fee that can be waived or reduced.

· Recognize that some items are non-negotiable: taxes, city and county stamps, recording fees, prorated interest and reserves. On the GFE, these items are in the 1000s and the 1200s.

1. Sell the property: If you can find a buyer before the house is auctioned, you can sell it and keep whatever equity still exists.

2. Work out a deal: Your lender may be willing to work with you, rather than lose money at a foreclosure sale.

3. Refinance with a subprime lender: Your credit is poor right now because of the mortgage delinquencies. This means most or all of the traditional banks will not work with you. However, if there is equity in the property, you may be able to find a lender who will refinance you -- at a higher-than-normal rate. These are called subprime loans, and they're increasingly common: About 20 percent of mortgages today are subprime.

4. File Chapter 7 bankruptcy: If you can't get caught up in time, you will not be able to keep the house -- but you'll generally be able to delay the foreclosure sale a month or even several months. Any remaining debt to the lender will be wiped out.

5. File Chapter 13 bankruptcy: If you can afford to make the future mortgage payments and the delinquent payments, too, file for a Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five-year plan.

6. Short sale/deed in lieu of foreclosure: A short sale takes place when the bank allows you to sell your property even though their mortgage won't be paid. Be careful -- the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. When might a bank agree to either of these? Lenders spend close to or more than $30,000 to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.

7. Walk away from the house: Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You'd be wise to speak to an attorney before taking this step.

Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.

Here are two options NOT to consider. In other words, they're scams.

Sure, you have options, but you need to avoid the scams and act quickly if you want to have the best outcome. Delaying only makes foreclosure inevitable.

You look around the house and it seems tired. Suddenly, the floor plan makes you feel claustrophobic, and the kitchen looks as old-fashioned as an "Ozzie and Harriet" set. When you flush the toilet and scald your significant other in the shower, you decide, "That's the last straw! Something's got to change."

Homeowners realize they need a change for many reasons: Some have growing families, others need a home office and still others have problems with their home's plumbing and electrical work.

But whatever the reason, the homeowner has two options for change summed up in the simple question: Should I stay or should I go? Remodel or move?

However, choosing whether to remodel or move is not simple. There are many factors both financial and emotional to consider, so where do you start?

"Location is everything," says Mark Brick, a Wisconsin remodeling contractor and past president of the National Association of the Remodeling Industry.

On the financial end, location determines the value of the property and whether a remodeling project or a move will be worth the money spent, he says.

Location also helps shape an owner's gut feeling about whether to stay or go.

"Some people are willing to live in an older home without the bells and whistles of newer construction because it is in a very desirable school district," says Mary Ann Appleton-Miller, a real estate agent with Keystone Group Inc. in Greensboro, N.C. Proximity to work, shopping, play, daycare and aging parents also may come into play, she adds.

Location also affects your potential remodeling options, Brick says. "You have to keep in mind (community) legal restraints that may prevent you from doing a remodeling job the way you would like to do it."

Still, if owners like the location and general feeling of the current home, it usually can be turned into their dream house.

"Can you find another home with the same features in the area you want to be in?" he asks.

Appleton-Miller suggests that before making that decision, homeowners should explore the housing market to determine whether they can get more house for the money or whether they should stand pat and remodel.

All other factors being equal though, she says owners should trust their feelings.

"People know down deep how they feel about their house, their neighborhood and what trade-offs they are willing to make," Appleton-Miller says. "If you love the neighborhood and the skeleton of the home, go ahead and remodel. If you are tired of the house or feel that you won't get your money out of fixing it up, then I would suggest looking at newer construction or remodeled homes in areas you do like."

Kevin and Melanie Peyton of San Jose, Calif., trusted their feelings, deciding six years ago that they loved their neighborhood so much that they would rather remodel than sell.

"We didn't really want to relocate," Kevin says.

Financial considerations reinforced their feelings.

"By remodeling, you can fit the house exactly to your lifestyle," Kevin Peyton says. "We found that we would get much more house than we could afford to buy."

Their project produced a virtually new house with 800 extra square feet, a formal dining room, a larger kitchen, a breakfast nook, a finished basement and a new facade.

The 63-year-old house had been remodeled a few times before, "so it presented a number of electrical and plumbing challenges," Peyton says. Many of the earlier changes were "held together by baling wire and duct tape."

"You quickly find that one thing leads to another," so they installed new wiring, plumbing and insulation in ceiling and walls. The improvements helped improve the home's fire safety and produced an annual $300 savings on the Peytons' homeowners insurance premium.

The Peytons knew the changes would hold their value because their neighborhood was desirable and that's proved true.

"For every dollar I put in here, I got two dollars back," Peyton says. The appraised value of the house just about doubled, he says.

He gives a great deal of credit to his remodeling contractor for helping them realize what was possible. That echoes advice that both Appleton-Miller and Brick give about consulting contractors who can help you to visualize exactly what you want rather than impose their vision upon you.

In researching whether to move, Appleton-Miller adds, you should consult with potential new neighbors to find out what living in that neighborhood is like.

When considering the remodeling route, she says, talk to friends and family for firsthand information.

"Sometimes people have had such headaches with a remodeling job that they say they would never do it again," Appleton-Miller says. "Others are so thrilled with the end product that they say all the inconveniences were worth it. These people are a great resource. They will bring a reality check to prospective remodelers who may be looking at the project through rose-colored glasses or they can help those on the fence with the push to move ahead."

One piece of advice that John and Beth Fuller of Reading, Mass., got was to avoid living in their house while it was being remodeled, but they didn't follow it and that's Beth Fuller's sole regret about the project, which was completed two years ago.

"Friends who had been through remodeling projects told me it would be stressful and hard on our marriage to live in the house while it was being worked on," she says. Living with the rubble, dust and workmen entering your private space takes a toll on every relationship. "I found that whatever your friends tell you about how tough it is you have to multiply by a hundred."

The Fullers' reasons for remodeling rather than moving were much the same as the Peytons'.

"We had bought our house at the right time," she says. "It was the last bargain in Reading."

The house's value, even without remodeling, was going up, up, up. That escalating market priced them out of buying another house in the area. Still, the plain fact was that the house was too small for them and their growing family, which now includes two children. Their solution was to refinance, taking advantage of lower interest rates and cashing out some equity to pay for adding an extra wing and refurbishing their 1850s farmhouse.

In addition to getting just the house they needed in the area where they wanted to stay, they boosted the appraised value of their home from about $300,000 before the remodeling to $500,000 afterward.

But remodeling is not always the answer, even if you love the home. Take the example of Shannon Wilkinson of Portland, Ore.

Several years ago she was living in a house that was built in 1906. It badly needed a second bathroom. Although she knew from the financial end that any remodeling would add to the home's value, "I wasn't really interested in surviving a remodeling while living in the house," Wilkinson says.

The house had never been remodeled before but it had some of those baling wire and duct tape fixes that would have to be addressed during a project and make it drag on.

"I didn't want to move out, remodel and then move back in, so I decided to buy another house that had more of the features I wanted already in place," she says.

Her experience offers proof that there are times when you can find such a house in the area where you want to live. In fact, the house she bought is just blocks away from her former house.

The "new" house, built in 1925, featured two bathrooms, a master bedroom and a bigger yard that better accommodates her two large dogs: a boxer and a Great Dane.

"I absolutely wanted to stay in the neighborhood," she says. "And if I couldn't have found the house I wanted, I probably would have moved out of the neighborhood, but that was really my last choice."

Financial considerations reinforced their feelings.

"By remodeling, you can fit the house exactly to your lifestyle," Kevin Peyton says. "We found that we would get much more house than we could afford to buy."

Their project produced a virtually new house with 800 extra square feet, a formal dining room, a larger kitchen, a breakfast nook, a finished basement and a new facade.

The 63-year-old house had been remodeled a few times before, "so it presented a number of electrical and plumbing challenges," Peyton says. Many of the earlier changes were "held together by baling wire and duct tape."

"You quickly find that one thing leads to another," so they installed new wiring, plumbing and insulation in ceiling and walls. The improvements helped improve the home's fire safety and produced an annual $300 savings on the Peytons' homeowners insurance premium.

The Peytons knew the changes would hold their value because their neighborhood was desirable and that's proved true.

The Secret to Pricing Your Home to Sell

Contrary to popular belief, when selling your home its value is determined by one thing and one thing only - what a qualified buyer is willing to pay for it. No more and no less. Sure, many sellers will argue that their home has an insurance replacement value, or an appraised value, or a tax assessed value, but unless your insurance agent, your banker, or your tax assessor is willing to write you a check for the home - guess what? None of that matters. A home without a buyer has no value in the market place. Sure it might have a value to you the seller, and it might have a value to your banker, and to your insurance agent, and to your appraiser. But none of these people are buyers.

So here is the secret to pricing your home to sell - It's not what you think the home is worth that matters, it's what a reasonable buyer will think your home is worth that will ultimately determine if your home will sell.

Now you maybe thinking - Hey wait, if I left it up to a buyer, they would pay me as little as possible for my home. True, they would. But in the real world every buyer knows that you, the seller, have no obligation to sell your home at any price. To purchase your home the buyer will have to make you an offer you can't or won't refuse. One that will motivate you to pack up your Ken and Barbie collection, hire a local mover, and wave good bye to a home full of memories.

But here-in lies the trap that many sellers fall into (myself included), which is the mistaken idea that we can hold out for an inflated price and eventually the market will come to us. Wrong! Buyers are under no obligation to buy any particular home, and no amount of marketing, open houses, websites, or signage will motivate a buyer to purchase an overpriced home. Why? Because they can buy one of your neighbors homes for less! This reveals one of the most important considerations in pricing your home - Price VS Time.

Understanding Price VS Time

The age old dilemma that has faced buyers and sellers since the dawn of private property rights is a simple question: What is more important price or time? Believe it or not this conundrum underlies and controls every sellers decision to sell, and every buyers need to complete a purchase. For sellers this boils down to the need to sell within a set time frame or instead to hold out for the best possible price, and as you might guess, for buyers it's the need to buy within a set time frame or to purchase a home for the lowest possible price.

A seller who would like to sell for top dollar should be prepared to potentially wait longer for a buyer willing to pay a premium price. Like trying to sell ice during December, a seller might have to give the stuff away just to get rid of it, but if they wait long enough, say until mid-August when temperatures crest over 100 degrees suddenly that same ice can have real value. On the flip side, a seller who needs to sell quickly, and doesn't have time to wait, should expect to discount their price somewhat because of the limited time they have to expose their home to the market.

What's the difference? Timing!

Buyers are in the same boat. A buyer who has the luxury of shopping for a home over a long period of time can probably wait to find a bargain, while another buyer who must buy a home in the next few weeks will probably be willing to pay a premium. Again it boils down to price vs time. So you might ask yourself what is your highest priority - Selling quickly or selling for a higher price?

Most sellers want their cake with the icing generously slathered on top. Because of this, many homeowners will attempt to put the responsibility of getting both top dollar and fast sale on the back of their hired gun, the real estate agent. The result can be summed up in one word - frustration. Why? Because no matter how much a seller yells, screams, and kicks a real estate agent, they don't do miracles. This is why successful sellers understand that while a real estate agents job is to provide marketing, expert advice, and negotiating services, in the end they don't own the property. They don't make the final decisions on pricing. The seller does, and ultimately the seller's asking price will in large part determine how slowly or quickly the home will sell.

To frame this discussion in a different way, consider what you will do should you arrive luggage in hand at the end of your listing period and the home has not yet sold. At that point are you more likely to give it a little more time or adjust your price? I know - Neither, I'll just fire the agent! To be honest, this is exactly what many sellers' do, they fire their agent and reboot the marketing. Does it work? Sometimes it does, but often these sellers end up three months later in the same slow boat to nowhere. Successful sellers on the other hand take ownership of their pricing decisions by making a clear decision about which is more important to them, selling quickly or selling for top dollar.

Successful sellers have learned that to price their home accurately means they need to think like a buyer, they need to get inside a buyers skin and look at the world through a buyers eyes. For instance, imagine for a minute that you are moving to another area of the country, to a city that you are completely unfamiliar with. If you were faced with buying a home in strange city what would be your first step?

If you're like most buyers you would probably start online by viewing listings at websites like www.realtor.com or www.yahoo.com/realestate to get a general feel for local home prices. Next you might narrow your search down to a specific community or neighborhood by comparing utility costs, school reports, and crime statistics with other online tools like www.homefair.com or www.neigborhoodscout.com. Feeling good about your findings you might then venture out into the real world to begin viewing homes in person.

As a typical internet empowered real estate buyer you will look at an average of nine homes over eight weeks with the assistance of a real estate professional. By the end of your journey, like many buyers, you become so knowledgeable about the market that by the last showing you are able to guess, with reasonable accuracy, each homes listing price before your agent can even tell you.

So what happened here? As a buyer you went from a blank slate, with no impression of the market to having the ability to predict listing prices. A big leap sure, but this description is exactly what most buyers' experience. But this is only the build up, the next step for buyers who have found their dream home is to review a Comparative Market Analysis.

A Comparative Market Analysis is a report that compares a specific home, often called the "subject home" with other homes in a specific neighborhood. This analysis is then used to provide an anticipated sales price or price range for the subject property. Although not formally called an appraisal, the report provides a similar function by giving home buyers and home sellers a clear understanding of the market data that might affect their opinion of value.