Q & A with Barbara Corcoran

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Q1 - I'm a bit confused. In a recent column you answered a question about the $7,500 credit which is a 15-year, no-interest loan available through HUD for first time home-buyers. What about the new program which offers an $8,000 tax credit for the same home buyers who purchase a home up until December 1st, 2009? Please explain.

A - Unlike the old $7,500 federal credit, the new $8,000 credit doesn't have to be repaid, making it as good as cash in your pocket.  It's only available through the end of this year for anyone who has not owned a principal residence in the previous three years.  Think of the new $8,000 incentive as a one-time only juicy gift from Uncle Sam. 

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Q2 - Rotten timing on our part, but we have been thinking of relocating to Vermont for a year now and had planned to sell our Carroll Gardens, Brooklyn 4-family ... then boom! Should we go ahead and list now or hold for how many years?

A - Once we're out of this depressing real estate trough, maybe in another year would be my best guess, your 4-family in Carroll Gardens will regain its lost value in no time at all.  Meanwhile, why not continue to rent three of the units to nice families who pay their rent on time, and swap your unit for a little farmhouse in Vermont.  You can offer to exchange your Brooklyn apartment for a Vermont house on sites like onlinehousetrading.com or pad4pad.com.  You and another family might just find each other there and get to try out your new lifestyles before you decide to settle in.

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Q3 - We moved to Phoenix and bought a starter home for $250,000 in a newly built community where we planned to stay two years. We rushed to get a "no doc" loan and are still paying 7% interest, in spite of having great credit scores above 800.  Now fifty percent of the homes in our never-finished neighborhood are in foreclosure and our house has lost half its value.  With recent cut backs at our jobs, it's getting tougher and tougher to make the $1,700/month payment.  We were raised with strong Midwestern values that keep us from even being able to imagine being a day late on a payment, but we're starting to wonder if we are in a situation that makes us idiots for continuing to pay our mortgage.

A - Good people like you should be able to go out and get a decent loan, but instead you're in the same bad situation as too many other nice families today.  If you want to keep your house, your best shot is asking your lender to modify your loan by either lowering the interest rate or extending its term.  The lender isn't obligated, but if you plead hardship and document your pay cut, you've got a good chance because the fed now offers incentives to banks to come to the table and negotiate.  But even if that fails, try to keep the faith and hold onto your house, because all house prices eventually go up.  Besides, your good Midwestern values won't let you sleep at night if you walk away.

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Q4 - I'll be retiring in two years and plan on buying a house in Florida.  How long in advance should I give myself from the time I buy something there and sell my house here in New York?  

A - Don't buy until you sell.  In fact, don't even shop until your buyer moves in!  On average, it now takes nine months to sell a house in New York, so you'll have plenty of time to shop.  Once you close, put your money in the bank and only then book a flight to Florida.  Take your time hunting for a really great bargain because there are plenty to be had in the sunshine state.  You can take a short-term rental there or, even easier, check into a local Holiday Inn and enjoy room service while you look for the house! 

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Q5 - I've been a Realtor for about 17 years and consider myself successful in our area. I have my associate broker's license and my CRS and ABR designations. I've been with a franchise company for most of these years and now my broker is considering going independent. How important do you think it is to be affiliated with a franchise?

A - The more successful you are and the bigger your client base, the less important it is to be affiliated with a big franchise name.  But if your company has no local brand identity of its own, leaving the franchise is a mistake as it will cost you too much business.

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Q6 - Can you recommend anything that could be done to save my mother's apartment?  My mother moved into a 1-bedroom co-op in lower Manhattan 30+ years ago with only her name on the lease. About 16 years ago she became eligible for Section 8 and since then her building has been privatized. She wanted my name added on the lease but that made her ineligible for Section 8 help so it was not done. Now, unfortunately, my mother has had to apply for Medicaid this year to get a 24-hour aid since she can no longer fend for herself.  She is worried that I will lose the apartment after she is gone.

A - According to Al Fazio of Capuder Fazio Giacoia, LLP, if your mother rents from the co-op sponsor and if the apartment is rent-controlled or stabilized, you might have succession rights when she passes, but only if you lived with her continuously for two years before her death.  If you don't live in the apartment for that period of time, the landlord is free to rent it to whomever he likes.

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Q7 - I cannot seem to make the numbers work for refinancing.  Our current rate is 6.75% and we owe slightly over $100,000 on 15-year note.  Since most of the payment is now being applied to the principle, it doesn't seem to save us any money by refinancing. Any suggestions? 

A - It probably doesn't make sense to refinance once you factor in the closing costs.  But if you can tolerate some interest rate uncertainty, you might consider taking a no-fee equity line of credit instead as it has no closing costs.  The interest rates are now running about 4% and if rates move up, so will your payments.  But with almost a 3% rate difference to play with, chances are good you'll still be way ahead of the game. 

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