Q & A with Dottie Herman

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Q1 - I was thinking of closing credit cards and someone told me that can negatively impact my credit. Is that true?

A - This is an excellent question since 2012 will be a year that credit card companies are more flexible with extending credit and offering better rate cards.  Most consumers tend to close accounts they don't actively use especially when they get better offers.

Closing credit can be a costly mistake and to understand why we must look at revolving credit.  Revolving credit (RC) is any credit you can choose to pay a minimum amount or decide how much you will charge up to the limit. This includes credit cards, overdraft on checking accounts, and many lines of credit. Balance to limit ratio's on RC have a great effect on credit scores.  The best case scenario would be a 7% balance to limit ratio.  This would give a consumer the best score in relation to revolving debt.  Once a RC account closes the limit associated with it is deducted from the total limits reducing the amount of balance the consumer can use without hurting credit scores.  Depending on the current balance of the open cards the drop in score can be extreme. The closer the total balance on RC inches up to the aggregate limit the more the score drops.

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Q2 - What exactly is a condop?

A - Unfortunately, the term is used in two different ways, so has two different meanings.  Strictly speaking, a condop is a building legally organized as a condominium, usually with a few commercial units and one residential unit comprising the bulk of the building.  That residential unit in turn is owned by a cooperative corporation (a "co-op"), which has shareholders and tenants, just like a typical co-op, and runs like a co-op in all other respects.  There are two boards of directors, one for the condominium and one for the cooperative, although typically the condo board is comprised of the members of the co-op board, together with one or two representatives from the commercial units.

The term condop is also used casually, and incorrectly, by some in the real estate industry to denote a co-op with "condo-like" rules.  It is often a co-op only because it is a land lease building, or it would have been organized as a condominium, and thus it "feels" like a condo with respect to operations (no board approval for resales or sublets, only rights of first refusal, etc.).

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Q3 - Should I use a real estate broker? How do I find one?

A - Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. 

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Q4 - Should I spend the money to have a home inspection?

A - Absolutely. The $200 to $500 that a professional home inspection costs could be the best money you ever spend on your house. Not only does the home inspector seek out any defects (and gives you some peace of mind), the home inspector will often give you tips on maintaining and repairing your house.

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If you have a real estate question for Dottie, please send it to; Reporters@WorldPropertyChannel.com