Q & A with Barbara Corcoran

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Q1 - Should I trust someone who contacts me to offer to help me negotiate with my lender?

A - That depends on who they are.  There's a glut of companies right now that promise to help you renegotiate a loan, find a better deal, or save your home from foreclosure.  They market their services very aggressively and often target home owners when they're most vulnerable.  Some are legitimate businesses, but many are just plain predators, and it's not easy to identify which is which.  But you can find the help you need by contacting the Department of Housing and Urban Development at www.HUD.gov where you'll find free, HUD-approved credit counselors.  Then you can use your money to pay your mortgage instead of counseling fees!

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Q2 - I plan to do some minor renovations this spring in my 2-bedroom co-op apartment in Queens - installing hardwood floors throughout, repainting, and buying a new sofa set. I read that getting a color scheme from existing objects in the room (perhaps my life-sized jukebox) is a good start. However, I think it would be better if I could get advice from a professional but affordable interior decorator. I do have a budget for this project, but being retired and working just part time, I'd like to stick to my budget and avoid costly mistakes.  Could you please direct me to a good source?

A - A good designer should be able to suggest creative ways to save money and still get the job done the way you want, and maybe you can even do some of the work yourself.  Designers use different fee structures, like hourly rates, flat fees or a percentage of what they buy.  Work out in advance which arrangement makes the most sense for you, as well as when payments will be required and when the job will be finished.  Make sure you're very clear on what you'll be paying for.  The best sources for a good designer are new developments where builders are stingy with their money but need to get a look that works and sells.  Visit them and you'll learn which ones might work for you.  There's also an online source of designers at the American Society of Interior Designers, www.asid.org.  Make sure to speak with their references to check on their professionalism and timely delivery.

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Q3 - Is it safe to buy in a building or development that isn't finished yet?

A - Buying in an unfinished development is riskier than ever, and if the builder is offering big concessions like widescreen TVs, gym memberships or  huge price discounts, odds are he's desperate to find buyers for his castle in the sky.  With today's credit squeeze, builders are having a harder time getting their permanent financing in place, which too often results in an unfinished building and angry new owners.  The key ingredient here is to make sure you have a shrewd real estate attorney.

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Q4 - Is it possible to get a second mortgage now?

A - Sure it is, but you won't be able to get as much as you once could and you'll pay a higher rate.  Banks today are typically financing no more than 75% of your home's value when you add a second mortgage, and rates are now around 8% for a fixed rate home equity loan.  You can save money if instead you get a home equity line of credit with a rate that adjusts with the prime.  You'll pay a few just 2-3% above the prime -- around 3.25% today - and that's a big savings.  The down side is you won't know where your rate will land in any given month.  If you're a Nervous Nelly type you're better off paying more now for the second mortgage and getting a home equity loan with the fixed rate.

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Q5 - I own a home in Florida which I presently rent out.  The mortgage is at 6.4%.  I would like to refinance in order to take advantage of the current low rates.  I have been told however that because it's an investment property we will not be able to refinance.   Is there any hope out there for the millions of Americans who are in the same position?

A - It depends on your bank.  Some banks today are willing to refinance mortgages on investment properties and some aren't.  Check with your lender.  But even if you can refinance, you may not do a whole lot better than your 6.4% because mortgages on investment properties are usually a full 1% higher than other home loans.  On top of that, they also have hefty pre-payment penalties. 

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Q6 - We want to sell our home, but not in the normal way.  We'd like to run a lottery, $50 a ticket, the money to be held in escrow. If we reach our asking price of $350,000 the winner gets the home for $50.  If we get less, the winner gets the money held in escrow. What do you think? Can this be done? And is it legal?

A - House raffles have succeeded in states where it's legal, but 90% of the time they don't work and the home owner ends up still owning the house and having to refund the ticket prices to the would-be buyers.  But if you still want to give it a try, here's what to do to increase your chances of success.  Do your homework.  Check the regulations in your state to find out if raffles are legal and what the requirements are.  Spend some time online studying the raffles that have worked and the ones that haven't to learn the do's and don'ts.  Next, try to find a non-profit partner with media connections, as you'll need a non-profit to make the raffle legal, and you'll want a partner who can draw in as many ticket buyers as possible.  Also be sure to publicize your raffle as it's the main ingredient for success.  Successful raffles creatively market well beyond the borders of just their local community.  Last, maintain meticulous records and have a CPA firm at the drawing.  You don't want a sore loser to accuse you of cheating!

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Q7 - Is there a decent selection of foreclosures in the New Jersey/Pennsylvania area? And are there any free or inexpensive websites that list foreclosures in these areas?

A - There are foreclosures everywhere right now!  They're all listed on big websites like foreclosure.com, foreclosures.com and realtytrac.com.  They charge about $50 a month after a seven day free trial.  You can also find free foreclosure listings on HUD.gov, but the site isn't as user-friendly as the others.  Another good way to find a foreclosure is to use a broker who specializes in foreclosures.  They usually know their local market better than you can, they save you time, and they provide an expert opinion on what the property is really worth!

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