Q & A with Barbara Corcoran

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Q1 - Do you think anything will be done before June 2009 to help those of us who now owe more than our homes are worth, but can't afford to put forth a large sum of money to get ourselves out of the situation?  For now I'm just managing to make my monthly mortgage payments and the homeowners' association dues on the condo I bought last summer, but I have almost no equity in the home.  My ARM is due to reset this summer.  My options are to file Chapter 7 Bankruptcy or walk away and let the bank foreclose.  But I love this place and want to do what ever I can to stay in it, and I'd prefer to pay my debts.  

A - Don't despair!  Just hold tight for another 60 days and you'll probably be able to take advantage of President Obama's new Home Rescue Plan.  By then the massive money that's been targeted to help homeowners get a more affordable mortgage will hit the pipeline.  Meanwhile, start talking to your  lender and check out your mortgage agreement to confirm its insured by Fannie or Freddie Mae as you need that to qualify for any government assistance.  Start the dialogue with your lender now to find out if they're willing to modify your loan under the new federal plan.  Provided you hold onto your current job, chances are good they will.

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Q2 - My girlfriend and I would like to buy our first house together in the Bushwick or Glendale area.  She has great credit, but she's in debt.  I have bad credit, but have paid off most of my debt.  What would our first logical step be?  Together we make about $85k.

A - First things first.  Go to a reputable mortgage broker to get pre-qualified and find out how big a loan you can get.  They'll tell you who should be on the loan, what the cost will be, and the best rates you can get.  If you leave the mortgage broker with your eyes wide open, plus a mortgage commitment in hand, you'll be much more comfortable shopping for your new home. 

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Q3 - I won a building lottery for a new luxury co-op on 148th street in Harlem.  I've lived for 12 years in Astoria and wish I'd bought when I first moved here.  But it's hard to believe that with today's economy, and the massive changes taking place to wealth in the US, the government and New York City, that Harlem is still a good place to consider buying real estate.  I read that real estate appreciated 500% between '96 and '07.  I don't imagine prices will go back to '96 levels but it doesn't seem that maintaining a several hundred percent increase is likely either.  The upside of the area 148th & 8th is that there is an express subway station within a couple blocks of the building.  But I'm concerned spending my money in a market that seems to be drying up and dangerously quiet right now.  Can you let me know what your thoughts are on investing in this location?

A - I own three small buildings within a few blocks of 148th St. with great tenants and no turnover.  I'm always out looking for other properties in the neighborhood because I believe in its long term appreciation.  Harlem real estate will sleep until the entire real estate market revives, but Harlem will continue steady climb upward once it does.  If you like the space and can picture yourself comfortably living there, take advantage of the lull and buy.  It's impossible to sharp shoot the real estate market.  The best you can do is buy within the low and even while prices continue their slide, you're definitely within the low now.

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Q4 - I purchased a property in Winter Garden, FL, during the height of the real estate market.  It was a mistake, and a costly one.  I put it on the market for sale for nine months and listed it with three brokers with little success.  Finally, I decided to rent it out and after seven months, it finally got rented in February 2008.  What advice can you give in terms of listing my cookie-cutter house while the tenant is still there? 

A - Most leases have a provision that allow you to show the house to tenants during the day one month before the lease expires.   Check the lease and see what it says.  If you need more time to show than the lease permits, go to your tenant and ask to show it early in exchange for a 5 or 10% monthly rent reduction.  But before you do that, you might offer to extend your lease with your existing tenant for the same rent or even offer a small discount.  It's expensive to move one tenant out and another one in and you almost always lose a months' rent.    Really schmooze it up and tell your tenant how much you appreciate them and how honored you'd be if they could stay.  Even grumpy tenants who pay, are beautiful in a bad market.

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Q5 - Last year I paid my mother's mortgage. My mother passed away since and the house is in my name now.  Can I just continue to pay the mortgage as it is even though the bank still has it in my mother's name?  Or do I have to take a second mortgage in my name which I found out is much more costly and very involved?

A - First you'll have to look at the terms and conditions of the mortgage signed by your mother when she bought the house.  Al Fazio of Capuder Fazio Giacoia, LLP says most mortgages contain a "due on sale" clause which means the mortgage becomes due upon your mother's death.  But sometimes, the bank is willing to prepare a simple document that transfers the parents' payment obligation to the child, which avoids refinancing the loan.  But beware!  If the interest rate on your mother's mortgage is higher than rates are now, the bank may opt to keep the loan at the higher rate.

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Q6 - We own several properties in Naples and Port Charlotte, Florida, each with a mortgage. Both of us are in real estate and have had no income for over a year. The value of our properties has dropped to what we owe on the mortgage. What will happen if we stop paying the mortgage on one of the homes? Will the banks have access to the other properties? Or can we just leave one house behind?

A - It depends on whether your loan is a blanket mortgage on all of your properties or if each property has its own deed and mortgage.  If it's a blanket mortgage covering all of the properties, you'll not be able to leave one house behind.  But no matter what, you'll need the help of a good real estate attorney because even with a deficiency judgment on only one house the bank may still have the right to pursue the other properties.  State laws vary as do the mortgage clauses, so don't mess around and be sure to get the advice of a good attorney.

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