How Will Donald Trump Finance His Campaign?

May 12, 2016
Trump Tower for Sale

Will The Donald put Trump Tower up for sale?

I recently read–and responded to–a blog posting that questioned how Donald Trump would finance his campaign. (That blog, by Carole
Ellis in Real Estate Investing Today, is here.) That blog asked whether “a HUGE real estate sell-off could be coming in New York City? Let’s just say the money’s gotta come from somewhere, and the GOP isn’t coughing up yet…” Alternatively, might he borrow against some of his assets? The problem, Ellis suggests, is that Trump has made a big deal about not accepting outside contributions, about not “being bought.” Can he reverse that stand now?

I think he can. I know he can. Here’s my response:

I’d be willing to bet that Trump WILL take outside funds. He’s certainly, ummm, “adjusted” his positions on other issues even within this campaign on everything from abortion and the minimum wage to banning Muslims from entering the United States. And none of that seems to have hurt his popularity at all.

Admittedly, one of his core appeals (others include: “He’s not a typical politician” and “He tells it straight.”) is that he isn’t “bought” by anyone. True . . . but look at Bernie Sanders and his successful fundraising at an average of $27 per contribution. It appears that in this election cycle, it’s possible to raise huge amounts of money in small chunks from actual supporters. No one would accuse Sanders of being “bought” because he accepts campaign contributions. Trump might well do something similar and he’d get away with it.

Besides, Trump established early in the campaign that he’s the one who buys off politicians with campaign contributions. That early branding should inoculate him from possible charges that he’s being bought with contributions.

I’m confident he wouldn’t sell any of his properties. They’re too much part of his image and his ego. He’s emotionally attached to them. (Imagine a Trump golf course or building being sold to, gulp, Chinese investors.) Nope, that won’t happen. And while I don’t consider him to be the great businessman he’s cracked up to be, I doubt he’d over-leverage any of his prize jewel properties, either. Maybe he learned something–not financially but brand-wise–from his Atlantic City experiences.

No. He’ll figure out a way to take money from outsiders and make it appear to be a virtue, not a vice.


I Belong to the “Mister Ed” School of Blogging

September 8, 2010

What’s your attitude toward blogging?

Mister Ed and his owner WilburI was reading someone’s blog recently on another site, and she explained that she’d begun blogging because of peer pressure. She was a Realtor. Other Realtors were doing it, and she knew it was important. So she posted a blog. Now, it didn’t say anything–but it was her first blog, so congratulations were in order.

However, going forward, what will be her motivation–and your motivation–to blog?

George Mallory–an English mountaineer who led three expeditions to climb Mount Everest in the 1920s and who died in a 1924 attempt–is famous for allegedly responding to the question: “Why do you climb Mount Everest?” with “Because it’s there.”

Do you blog “because it’s there”? There’s nothing wrong with emulating George Mallory, though try not to end up the same way he did! But, for blogging, is it enough that “it’s there”?

I myself belong to the “Mister Ed” school of blogging. You remember Mister Ed, don’t you? Well, you might if you’re old enough, or enjoy reruns. The TV show ran from 1961 to 1966. It was about a talking horse–Mister Ed–but Ed would only talk to his owner Wilbur (or as Mister Ed would say Wil–burrrrrrr) and to others but only on the phone.

Part of the show’s theme song went:

People yakkity yak a streak
And waste your time of day
But Mister Ed will never speak
Unless he has something to say

For me–whether I’m blogging or whether I’m reading someone else’s blog–that’s the key. Do I (does he, does she) have something to say?

What do you say?


Some Truly Stupid Email Subject Lines

July 23, 2010

Do you ever feel that “enough’s enough” as far as stupid, misleading, or just peculiar email subject lines are concerned? I know I do. And it seems like I’ve been receiving more and more of them recently dealing with real estate investing. (Well, not really real estate investing. More like selling products to would-be real estate investors.) I guess it’s because the “ordinary” or straightforward subject lines don’t work as well any more.

It’s gotten like the headlines you see (if you choose to look) on tabloids like News of the World. Sort of a “Can you believe this? Can you top this?”

Here are just a few recent ones that have slithered into my in-box:

Scandalous Mexico Photographs exposed [Greg Clement. February 23, 2010. First line of e-mail: “I will unveil dozens of scandalous pictures from Team Realeflow’s recent trip to Mexico on Thursday’s “Wealth Protection” webinar with Jeff Watson.””]

My wife is scamming my brother and I. It’s B.S.! [Josh Cantwell: June 18, 2010.” In addition to being grammatically incorrect (should be “brother and me,” Cantwell’s e-mail doesn’t make any sense vis-a-vis the subject line: “I put together some free training videos and an ongoing case study of a REO that we just bought, and that my brother Mark is rehabbing with my wife Lisa’s IRA funds. This deal has some super cool, and one not so cool, twists to it, and it going to be a great case study for you to follow and learn from.”

My friend Lee has lost it… [Mike Ochsner: April 23, 2010. “I’m not sure if you were on the webinar last night, or if you came and left, because you were unsure exactly what you were seeing, but I’ve got to say, I was shocked by the whole thing. Lee has never, I repeat NEVER, done anything like this.” As in Casablanca: “Shocked! Shocked, I say.” In this case, Mike was shocked that Lee offered the some sort of discount  on an overpriced program–probably along the lines of the “$37,000 value for only $1,995” pitch.]

**Newsflash** Google Is Run By COMMUNISTS [Preston Ely: July 21, 2010. Explanation: “you’re not gonna believe this … so the other day, Google shut half my advertising campaigns down.  They wouldn’t even give me a reason.  Apparently they are communists who don’t like their advertisers making actual money. But that’s not all … Then I’m at lunch with this dude who tells me that Google secretly accepts bribes (I mean payments) from companies to ensure they get top organic rankings! Can you believe that??? Freakin crooks!” That’s a long-winded attempt to promote a book and a product that tells you how to get high rankings from Google.]

“Minnie Mouse Caught Cheating On Mickey With Preston Ely!” [Preston Ely: July 1, 2010. Here’s the explanation: “I used to love Minnie Mouse.  So much so that I wanted to punch Mickey in the whiskers and steal her.  There is a relatively good chance that you can’t relate.   I tell you this for the same reason I tell you anything, which isfor no reason at all.  I just happen to be hosting a huge real estate / internet marketing event in Orlando July 22-25, and it reminded me of my youthful Disney character crushes, of which there were many (*cough* Princess Jasmine *cough*).” Well, that may be more than we need to know]
 
“Caught On Tape!”  Preston, Britney Spears, & Marilyn Manson! [Preston Ely: July 5, 2010. OK, this is another one, though not quite as peculiar as Ely’s fascination with Minnie: “Don, I’m gonna be honest … the video you’re about to see if maybe one of the most scandalous I’ve ever made.  I almost wasn’t going to send this to you, but you’re going to learn soooo much that I just have to. It’s over two hours of me teaching marketing and motivation at the Freedom$oft event I hosted in March. You’ve never heard anything like this before in your life – I promise you.” I’m still not sure what Britney Spears and Marilyn Manson have to do with this.]
 
porn isn’t the answer [Preston Ely: March 25, 2010. Talk about a killer app: “Did you know that pornographers used to be the #1 generator of $$ on the internet?  True story.  Feel free to use that little fun fact at the water cooler today in the office.  Thankfully they’re not anymore.  Guess who is? We are.  You may not have known this, but my friends and I make more money on the internet than anyone in  the world.  We literally dominate it.  Google my name if you don’t believe me.  (preston ely)”

Do you think DC is sexy? Or does it look like he got beat with an iPad? [Than Merrill: May 11, 2010. “I know DC Fawcett really well…and he is decent looking guy, but he is definitely not Brad Pitt. And seriously look at this picture?  Who takes a picture like this? Who I say? Nobody normal that I know… However, today DC must be wearing some special cologne or milkbone underwear because I have never seen such madness. We ran a webinar with him this morning about his “Commercial Short Sale System and Partnering Opportunity” and as soon as the webinar ended the phones in my office blew up.”

Greg Clement & Jeff Walker Are Gay [Preston Ely: August 9, 2009. “Web definitions for gay: cheery: bright and pleasant; promoting a feeling of cheer; “a cheery hello”; “a gay sunny room”; “a sunny smile” What’d you think I meant? You’d be gay and cheery too if you had the bad ass SIMS system working for you like they have for themselves!’] 

COFFEE ENEMAS OR IRS ENEMAS…WHICH ONE IS HEALTHIER? [Dwan Bent Twyford: June 8, 2010. Honestly, Dwan and her husband Bill seem to be two of the more straight-shooting folks, and they send out far fewer e-mails than the folks above do. And perhaps the subject line isn’t misleading. From the e-mail: “If you have ever been on the receiving end of an IRS enema, you know how much control they actually have once they set their sights on you. Having personally gone through this. Join me on WEDNESDAY EDUCATIONAL DAY which is on THURSDAY this weekI never want to see it happen to you!
.
In a related category are the “Apology” e-mails. Often, these “apologize” for supposed computer crashes after an all-to-successful product introduction, or apologies for not having enough inbound lines for a webinar. You’d think these folks would get tired of playing the village idiot.

I am so sorry about what happened last week. [Greg Clement: February 9, 2010. This one almost sounds legitimate: “Last Thursday’s very important INTERNET training webinar was cancelled.  Jeff Walker got sick and couldn’t make it.”]

FW: sorry my fault [Greg Clement: February 2, 2010. “The email I sent yesterday had a link in it that didn’t work for a lot of people.  SORRY.” This sort of thing seems to happen a lot.]

Sorry, I sent you the wrong link. [Greg Clement: January 19, 2010. “I just sent you an email and it had the wrong link in it. Ignore the link that I sent you in the previous email, it won’t get you on the early bird webinar.”

*whoops* no links in that last one … (How to HIJACK Your Buyer’s Brain For Billions) [Preston Ely: June 3, 2010]

That’s the sort of e-mail subject lines being sent out now to try to capture the public’s clearly waning attention. Wonder what it’ll take next year? And, perhaps more seriously, it’s becoming more and more difficult to take these folks, their pitches, and their big buck products seriously. I’ll admit: McDonalds sells hamburgers with Ronald McDonald as a pitchman. But there’s a difference between a 99 cent hamburger and a $1,995 real estate program.


Parcel Plus, Mail Boxes, and CMRAs: A Cautionary Tale

January 5, 2010

Imagine you woke up tomorrow and discovered that all incoming service from the U.S. Postal Service, UPS, and FedEx had stopped. Without warning. And leaving you no way to retrieve any incoming mail or packages.

Well, that’s what can happen if you rent a mail box from a commercial mail receiving agency (CMRA) such as Parcel Plus. I know. It happened to me. And it can happen to you if you rent an mail box through a similar service.

I had my business mailing address at a Parcel Plus location–Parcel Plus Center 66 in Fairfax Station, Virginia–in a strip shopping center. I’d had the box for several years. That was the address on my business cards and on my other papers. It was the return address on the direct mail I sent out. It was my business address. 

Then, one day (October 24), I took my son for a haircut at a barber shop next door to the Parcel Plus . . . and the store was closed. Locked up. Kraft paper on the windows. And a “For Lease” sign in the window. No warning. No advance notice. Here yesterday, gone today.Without warning, Parcel Plus store 66 in Fairfax Station shut down.

I contacted the U.S. Postal Service to attempt to have my mail forwarded. It’s easy enough; you can do it online. But you can’t do it if your mail was going to a commercial mail receiving agency. The Postal Service says, “Mail addressed to an addressee at commercial mail receiving agency (CMRA) is not forwarded through the USPS. The CMRA customer may make special arrangements for the CMRA operator to re-mail the mail with payment of new postage. A CMRA must accept and re-mail to former customers for at least 6 months after termination of the agency relationship.”

The U.S. Postal Service says that it can't forward mail addressed to a CMRA.

USPS declines to forward mail from a CMRA.

Okay. Try making arrangements with an operator who’s stolen away in the night. The phone was disconnected. The e-mail address doesn’t work.

But at least the CMRA is a franchise, right? And in this case Parcel Plus–or Parcel Plus’ parent company ICED Franchise Development–might be able to help? At least to contact the franchise owner to make arrangements for mail forwarding. Well, they might be able. But they might choose not to.

First, I tried filling out a form on Parcel Plus’ web site. Did that about 9 times over the course of 30 days through October and November. No response.

Parcel Post contact form

Parcel Plus only offers a web form as its only method of contact.

Then I tried calling. You can’t find a phone number on the Parcel Plus web site. But you can see that Parcel Plus is owned by ICED. Go to ICED’s web site, and if you search you can find a phone number. It’s for Kris Sabo, ICED Franchise Development Support Manager. I called it (December 16, 5:30 pm–I keep track of these things) and explained my situation. I was promised a phone call back. And later I received a voice mail from Jay Groot. Groot is president of Kwik Kopy Business Centers, and in November had been named president of all print brands under the ICED umbrella, as well as Eagle Franchise Systems, Inc., franchisor of Parcel Plus.

Groot referred me to Rick Hatfield, who serves in some position (I don’t know what) with Parcel Plus. I called Rick on December 17 and got his voice mail. I left a message and he called back, leaving me a message that he could provide me a contact number for Sam, the owner of the Fairfax Station franchise. But he wanted to make sure that’s what I needed. I called back, left him a voice mail saying that would be OK.

Never heard back from Rick. I called him again today (January 5, 4:55 pm). I was transferred to his voice mail, where I left another message.

So, what’s the moral of the story? Well, as tacky as a “P.O. Box” may look on stationery or business cards, it’s a heck of a lot safer than dealing with a company that can close down in the middle of the night. And understand that if your “commercial mail receiving agency” does close down, you’ll need its cooperation to have any mail forwarded to you. And if they won’t cooperate, don’t depend on any parent company to help.

This isn’t intended as a commentary on any one company out there. No criticism is meant or implied. It’s just a cautionary tale on what can (and in one case did) happen to a business that happened to use a commercial mail receiving agency. (And I was mailbox 150. I wonder what happened to the other 149 or so customers who discovered without notice that their mail had been cut off.)


17 Questions To Ask Before Signing A Lease-Option

February 7, 2009

Recently, a person who was looking for a new place to live told me she was thinking of doing a lease-option–a rent-to-own–to buy a place. Her credit wasn’t that good, and a lease-option sound like a good idea. The rent-to-own was being offered by a real estate investor. This was going to be her first home purchase, and she figured she should be asking a lot of questions. But she didn’t know where to begin.

I provided some suggestions, and some explanations for why she should be asking those questions. Here’s what I told her to ask, and why.

What is the length of the option? [Aim for a minimum of 2 years. Longer is better–3, 4, or 5, for instance. It often takes more than a year to clean up your credit, accumulate sufficient option credits, and position yourself to buy a home. And in today’s economic climate, refinancing/purchasing in just a year may be difficult if not impossible.]

Is there a provision in the agreement that allows me to extend the option if I’m unable to get financing during the option period? [There should be. It probably would come at an extra cost, such as $1,000 or $2,000 to extend the option period.]

If the price of the home declines below the option strike price, what protections do I have? [Possibilities include extending the option period to allow home prices to climb again, or renegotiate the purchase price of the home so that the purchase price doesn’t exceed its true value.]

What will be the purchase price of the house? [That should be specified in the option agreement. Usually that’s specified as an exact price–for example, $425,000. It’s also permissible to say that the price will be determined upon exercise of the option. In that case, though, the exact method should be specified.]

What happens if the property owner can’t make his payments and there’s a foreclosure? [Straight answer: You’d lose out. The option would become worthless. An honest real estate investor will tell you that.]

How can I make sure the owner is making his mortgage payments? I don’t want to lose the property to a foreclosure. [There’s a document called “Authorization to Release.” It’s signed by the home owner, allowing the investor to contact the owner’s lenders and verify account balances, payments, and so on. Real estate investors typically have owners sign an authorization so they can make sure that there isn’t a looming default or foreclosure. Usually the tenant-buyer doesn’t request such a document, or even know of its existence. But someone should be monitoring the owner’s mortgage status to make sure that all is OK.]

Is this a sandwich lease-option? [It probably is if there’s an investor involved. That means the investor has negotiated a deal with the seller regarding monthly payment, purchase price, and other details. The investor then seeks a tenant-buyer. Generally the investor charges the tenant-buyer more per month than the investor is obligated to pay the seller. And the option price that the tenant-buyer pays is greater than the price negotiated between the seller and the investor. There’s nothing wrong with that arrangement. But it’s important to understand the role of all the players.]

Who is responsible for repairs on the property? [Often, it’s set up so that the tenant-buyer is responsible for the first couple hundred dollars of any repair, with the owner responsible for the remainder. The owner should keep his/her insurance in place on the property, to cover any insurable problems. And sometimes one of the parties–the investor or the tenant-buyer–will purchase a homeowner’s warranty to cover other problems and failures.]

How much of my rent payment is credited toward the purchase price? [It’s whatever you negotiate. Very roughly, 20% is often considered fair. If it’s much less, there may not be sufficient incentive for the tenant-buyer. And if it’s a lot more, that could cut into the seller’s (or investor’s) profits. But I’ve seen it as low as 10% and as high as 110%.]

How much up-front option money do I need? [That’s negotiable. Often, it’s the equivalent of 2-4 month’s rent. Generally, it shouldn’t be much more than that.]

If I don’t buy, what happens to my up-front option fee and my monthly option credits? [Honest answer: You lose them in most cases. Virtually all lease-options are written so that the tenant-buyer forfeits any option fees and credits if he/she doesn’t exercise the option.]

I know I need to improve my credit to buy. What would you suggest? [If the investor knows what he’s doing, he’ll suggest that you begin working immediately to clean up your credit. Often, the investor will have a mortgage broker or lender on his team, and will refer the tenant-buyer to that lender. It is NOT adequate to say “We’ll worry about that later” or “If you make all your payments on time, there shouldn’t be any problem.]

Since I’m buying, do I get to claim the taxes and interest on my tax return? [This is a question to determine the investor’s honesty and knowledge. The answer is “no.”]

How often do people like me buying a house on a rent-to-own actually end up buying the house? [We’re testing the investor’s honesty and knowledge again. The answer can vary anywhere from a low of 10% to as high as perhaps 70%. It depends on the conditions of the lease-option, the screening process used to select tenant-buyers, and the credit clean-up and restoration process of the tenant-buyer. Even in the best of circumstances, the figure seldom exceeds 70%.]

How can I make sure the owner doesn’t sell the home to someone else while I’m in it doing a rent-to-own? [The investor should have filed a “Notice of Agreement” with the local county or city records office. That notice will “cloud the title” of the property. Thus, whenever a title search is done on the property–which would occur if the owner attempted to sell the property to someone else–the notice will appear, clouding the title. The notice would have to be resolved before the seller could convey clear title to a new purchaser If a tenant-buyer is working directly with the seller, the tenant-buyer should have the seller sign a “Notice of Agreement” and file it.]

Won’t a rent-to-own trigger the “Due on Sale Clause” in the seller’s mortgage? And if it does, what happens to me? [If there’s a mortgage on the property, a rent-to-own can trigger the “Due on Sale Clause,” thus making the mortgage due and payable immediately. Frankly, that seldom occurs. Many lenders don’t notice the signs that possibly indicate that a lease-option has occurred. And even if they do, there isn’t much incentive for them to call a performing mortgage due. Currently, they have more than enough non-performing mortgages to worry about. But, technically, a lease-option or rent-to-own could trigger the Due on Sale Clause.]

Can I take the rent-to-own documents to my lawyer so he can review them? [The answer must be “YES.” Absolutely. If any investor, or any homeowner, shows any reluctance about allowing a tenant-buyer to have all documents reviewed prior to signing, then run away from that deal. And don’t settle for “That’s not our policy” or “We’ve never been asked that before” or “Sorry, but these are proprietary documents.” The answer must be “YES.” Period.]

Well, those are just a few of the questions a tenant-buyer should be asking the investor (or home owner, when an investor isn’t involved). Rent-to-owns actually can be win-win situations for everyone: owner, investor, and tenant-buyer. But the investor and the tenant-buyer both need to understand what they’re doing.


How To Sell A Home Cost-Efficiently

June 1, 2008

I recently answered an online question regarding methods to sell a house cost-efficiently. I thought I’d share those thoughts here.

First, a lot of the discussion revolved around whether a seller should opt for “For Sale By Owner” (FSBO) or should list with a Realtor. Both sides quote statistics: Realtors will argue that on average they can sell a house for x% (usually around 15%) more than a FSBO can. And they’ll point out that around 85% of houses that start off as FSBOs end up getting listed with a Realtor. On the other hand, proponents of FSBOs argue that most of the services offered by Realtors can be purchased a la carte, with the total adding up to far less than the commission some agents might charge.

A final note on the point of Realtor commission: Commissions are negotiable. An agent might choose not to lower his/her commission. That’s part of the negotiating process. But commission rates are not “set” — they’re not set by any group of Realtors, or by the state, or by federal law.

So it’s not just adding up the Realtor commission on one side, then adding up your a la carte costs on the other. Further, some people just don’t have the organizational structure to sell a home on their own. Some people are left-brained, some right-brained. Some thrive in structured environments; some are free spirits. So, even when all other factors may be equal, the seller’s personality, organization, and mind-set are important elements.

Further, even if you do it all yourself, what’s your time worth? You’ve got to factor that in.

So, I don’t think there’s a blanket answer as to whether a Realtor or going FSBO is a better choice from a cost-efficiency standpoint.

However, setting aside for a moment the debate about Realtor vs. FSBO, keep the following points in mind:

Price it right. It can be priced right even as a FSBO, and it can be priced wrong even using a Realtor. Now, while there’s no one “right” price, you probably want a balance between price and anticipated time on market. That’s especially true if the house is sitting there empty. Price it too low, and you’re leaving money on the table. Price it too high, and it probably will take longer to sell, if it ever does sell. So look for maximum efficiency regarding your price.

Second, regardless of FSBO or Realtor, it needs to be marketed. Most marketing costs some money–web sites, direct mail, signage, listing on the MLS (even if you’re a FSBO)–but it’s necessary. And that makes it cost-effective. It doesn’t help to “save” a couple thousand dollars on marketing if that marketing budget would have sold your house.

Third, consider home staging, either using a professional (highly recommended) or doing it yourself, but being absolutely ruthless. As with marketing, home staging can cost several thousand dollars or more (or as few as a few hundred, for a walk-through and report from a home stager on things you can do yourself). In today’s market, home staging may not bring you much more in the way of an offer. But it can be the difference in getting offers and not getting offers. And speaking of cost effective, home stagers like to point out (correctly) that even a full home staging is going to cost far less than the first listing price markdown you do.

There’s no point in spending more money than you have to in selling a home. But sometimes you may have to spend a bit more in order to sell more quickly, or for the best price.


How Will The Real Estate Market Be Affected By The Presidential Elections?

June 1, 2008

The residential real estate market has slumped across the country. Some areas have been hit worse than others.

In the search for solutions, some are looking to the presidential elections. There’s a hope that, somehow, the election of a new president will re-energize the markets. But will it?

First, any effect will be psychological. Now, that’s not to discount psychology. A lot of what’s affecting the current market is buyer (and seller) psychology. And that was certainly the case a couple of years ago, before the real estate bubble burst. People were buying on emotion, not facts and reality. The market was soaring; their friends were making fortunes in a matter of months, and they wanted in on the action. The facts suggested that the growth rate was unsustainable. And reality suggested that soon, with continued escalation of prices, no one would be able to afford a home.

So, what might the psychological effect of the presidential election be? Considering that many people blame the current Bush Administration and its policies for the position we’re in now, the election of someone who supports the current policies probably would have very little effect. The election of someone who represents a break with the past could have a significant psychological effect.

Note: I know it sounds as if I’m saying Obama would help the real estate market and McCain wouldn’t. Again, we’re talking psychology, not actual policy. From that perspective, then, an Obama victory might help, and probably more than a McCain victory.

But it could be possible for McCain to stake out a far different economic position than Bush has. Or he might select someone as his vice presidential running mate who would do that. Or announce people he’d like to appoint to his Cabinet.

On the other side, while Obama in general reflects change, he’d still have to articulate a position of change as it applies to the economy in general and to real estate in particular. And, yes, if Clinton somehow got the nomination, the same conditions would apply.

Obama’s website, at the moment, doesn’t have much detail on the subject. He does say:

“Obama will crack down on fraudulent brokers and lenders. He will also make sure homebuyers have honest and complete information about their mortgage options, and he will give a tax credit to all middle-class homeowners.”

But that’s not the root of the problem.

Obama’s site also says:

“Obama will create a fund to help people refinance their mortgages and provide comprehensive supports to innocent homeowners. The fund will be partially paid for by Obama’s increased penalties on lenders who act irresponsibly and commit fraud.”

That might help a small portion of those in trouble. But it won’t help anyone who’s already lost their home, either via a foreclosure or short sale. And it doesn’t appear to help people whose homes have lost substantial value. If someone bought a home in 2006 for $500,000 and it’s now worth $350,000, refinancing that $500,000 mortgage, while lowering payments slightly, still leaves the homeowner “upside down” by $150,000. And all the other homes in that neighborhood are still only worth $350,000…versus $500,000 a couple of years ago.

Meanwhile, McCain does have a proposal, but when you consider the paperwork, the hoops homeowners would have to jump through, and the bureaucracy it’s sure to spawn, there’s a real question of whether it would benefit many homeowners.

McCain’s website says:

John McCain Is Proposing A New “HOME Plan” To Provide Robust, Timely And Targeted Help To Those Hurt By The Housing Crisis. Under his HOME Plan, every deserving American family or homeowner will be afforded the opportunity to trade a burdensome mortgage for a manageable loan that reflects their home’s market value.

Eligibility: Holders of a non-conventional mortgage taken after 2005 who live in their home (primary residence only); can prove creditworthiness at the time of the original loan; are either delinquent, in arrears on payments, facing a reset or otherwise demonstrate that they will be unable to continue to meet their mortgage obligations; and can meet the terms of a new 30-year fixed-rate mortgage on the existing home.

How It Works: An individual picks up a form at any Post Office and apply for a HOME loan. The FHA HOME Office certifies that the individual is qualified and contacts the individual’s mortgage servicer. The mortgage servicer writes down and retires the existing loan, which is replaced by an FHA guaranteed HOME loan from a lender.

So, under McCain’s plan the homeowner had to be creditworthy after 2005…but nevertheless have accepted an “unconventional loan”…and must be in trouble now…but still must be able to qualify for a 30 year conventional loan. That eliminates a huge chunk of the population in trouble.

And then there’s the fact–as with Obama’s plan–that you’d still be refinancing a $500,000 mortgage on a $350,000 property. When Harry Homeowner wants to sell in a year or two, and his property is still worth under $500,000, what then? Are we just postponing tens of thousands of short sales?

If any of the candidates came in with a “Marshall Plan for Housing,” a major program, well laid-out, with some freshness and creativity, that could have a positive effect. Otherwise, I wouldn’t expect much.

One exception: The housing market around Washington, D.C. Every time there’s a presidential election, housing activity increases simply because a lot of people (administration officials, staffers on the Hill, congressmen and representatives, and so on) leave, and others come to replace them. I think it’s safe to say that there might be a greater turnover in all those categories than in past years. So, it’ll help the DC area. As for the rest of the country? Highly unlikely.

Don Tepper,
www.Solutions3DHome.com
www.WeBuyFairfaxHouses.com

________________________
Realtor with Long & Foster licensed in Virginia