Q & A With Barbara Corcoran

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Q1 - Is it true that the federal government won't allow banks to foreclose on my house?  I heard that there was a new law passed that will stop foreclosures.

A - The new legislation is really only a moratorium halting the sale of foreclosed properties between now and January 9th of next year.  It's intended to help roughly 1600 borrowers who would otherwise have been evicted during the holiday season. The moratorium is also intended to create a little breathing room and give lenders some time to change the terms of mortgages that are now delinquent. The government wants lenders to reduce interest rates, delay back payments and penalties, stretch the length of the loan or defer payments on part of the principal, all methods designed to lower homeowners' monthly payments. The moratorium will also hopefully give the government more time to come up with a real modification program that will actually work.  

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Q2 - I've worked with two different brokers and advertised aggressively only to get just two low offers on my house. I really need to get at least $65,000 in profit out so I can buy my next house. Should I change brokers again? And how do I know who's a good one?

A - It's not the brokers who are in charge of the market, but the buyers. Buyers decide what your house is worth based on what they're seeing when they shop the market. There are a lot of houses out there now with reduced prices that have been sitting on the market for six months or more, and that drags all other house prices down. Keep your broker, but reduce your price.

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Q3 - My husband and I own a property in Colorado. We desperately want to sell it as we have no equity. We have a great renter and don't want to raise his rent for fear of losing him.  But his rent doesn't cover our mortgage. Should we try for a short sale?  What would that do to our credit?

A - You're crazy to attempt a short sale, because it will reduce your credit score by 200 to 300 points, much like a foreclosure does, and it's too extreme a reaction. Don't be so nervous about raising the rent. Just give your tenant ample notice. All tenants expect rents to rise and chances are good rents are creeping up all over the neighborhood and if you go online you can check out what comparable homes are renting for now. It's nice to have a great tenant, but if you don't raise the rent a little at a time as the lease term expires, you'll find your great tenant won't tolerate any kind of increase ever!  When rent doesn't cover your mortgage, a tenant changes from being great to being the one you can't wait to get rid of.

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Q4 - I've been searching for my first home since I felt this would be the best time to buy, but I haven't found anything I like in my price range. Would it be a good idea to build rather than buy my first house?

A - Don't even think about building a home because it will cost you more. Here's what you should do: Raise your price ceiling by 25% and start looking at higher priced homes. You're bound to find a few homes to fall in love with. And when you do, put in a bid 30% less than the asking price on the house and see what happens.  If you do this on three different homes, you'll make one of those houses yours at a price you can afford.

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Q5 - My daughters are in the process of buying a two family home. It was suggested that they seek out a buyer's broker. They have no knowledge of how a buyer's broker would be of help.  Would you suggest they find one? Or should they just find a real estate company and go with the seller's broker?  

A - They can do either. If your daughters hire a buyer's broker they'll know their broker has only their interest at heart. If they hire a real estate agent who works both the buy and sell side of the transaction, they can still feel confident that their interest is well represented if they choose their agent carefully. The best way to find a good real estate agent is through a personal referral, and as only 5% of all buyers find their house through a buyer agent, chances are good the agent their friends will recommend will be one that represents both buyers and sellers.

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Q6 - My husband and I own a house in Northern Westchester that we bought three years ago and we've managed to save some money since then. Would it be best to put that money towards the house so that we can lower the mortgage, or to invest it on some other property?

A - Over the long haul, you'll make the most money if you're willing to buy another property.  There are five houses out there for every one buyer today, which makes for easy pickings for the risk takers. But before you take the leap, make sure you factor in how well you'll sleep at night having your money in both properties. I sleep like a baby at night and the more properties I own the better I sleep dreaming about how rich I'll be in ten years.  

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Q7 - I was watching an economist on TV who said that the real estate market won't come back for 10 to 20 years.  Do you agree?

A - The economists are mostly nuts. Real estate markets always come back with the exception of possibly a one-horse town out in the middle of nowhere with no one living there.  And even that town is apt to be discovered by some Hollywood agent and turned into a ghost-town movie set, and even there real estate values would begin to rise.