Q & A with Barbara Corcoran

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Q1 - We're newlyweds who recently started shopping for our first home.  This week our Realtor showed us a house we like, but it's a short sale.  What do we need to know if we decide to buy this house?  Also, what is the difference between FHA Forward, HECM and Freddie Mac/Fannie Mae, and what would be the best agency for us to use to get the lowest rate?  We want to borrow about $550,000.

A - An HECM loan is a reverse mortgage for people 62 or over and I'm guessing that, as newlyweds, you're probably too young for that!  The Federal Housing Administration, Fannie Mae and Freddie Mac don't actually make loans - the FHA insures loans, and Fannie Mae and Freddie Mac buy them.  You can get an FHA, Fannie Mae and Freddie Mac backed loan for up to $625,250 on any house, including a short sale.  The smartest thing to do is speak with a banker or mortgage broker to find the loan that's best for you.  Whatever type of loan you choose, don't overlook the new $8,000 federal tax credit for first-time buyers!  It's as good as cash in your pocket and it's yours if you purchase before December 1st of this year. 

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Q2 - I would like to take $50,000.00 of my inheritance and start investing in real estate. Where should I start? The economy is not getting any better at this time. Should I wait for things to change? If I wait will I be missing out on good opportunities? I just don't know where to start. I am starting my life over again.

A - Start with an area you know well or, if not, find yourself a partner who really knows it.  I like to invest in inexpensive neighborhoods where my money buys more, but only along with a partner who knows the neighborhood values inside and out.  There are lots of smart young people who have no money but are anxious to become real estate investors.  There are also many people with the cash who don't know the neighborhood.

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Q3 - I have a mortgage with GMAC that is going to reset soon and I will be unable to afford the new payment.  My question is, since GMAC became a bank holding company, do I have a better shot at renegotiating or modifying my mortgage with them?

A - Whether or not it's a holding company makes no difference.  But staying with your current lender does make sense.  If you're current on your payments and your credit is good, GMAC will probably renegotiate your loan.  If not, you should look for a lower rate elsewhere.  You'll also save yourself time and aggravation if you work with a good mortgage broker.

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Q4 - My husband Bill is a pack-rat, and we're getting ready to move to Florida.  What can I tell my husband to get him motivated to go through his stuff and throw things out so we can sell the place?

A - Tell Bill that the buyers can't see through his stuff!  Explain that for every pile of junk a buyer sees, Bill will get $1,000 less when the house is finally sold.  Tell Bill you'll be taking your loss out of his half.

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Q5 - I'm 30 years old, I have about $16,000 saved up, and I want to buy a two or three family home.  Where in northern New Jersey would you suggest I look?

A - Check out Morristown, NJ. The county seat has a bustling downtown with new condominiums and rental buildings. The recession hasn't seemed to touch this little town as retail stays strong. They also have beautiful churches, a town green, wide streets with Victorian houses, and you'll get higher rents as well. Closer to New York, there's Harrison, New Jersey, a growing town near Newark where two-family homes in need of TLC go for about $140,000.

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Q6 - My husband and I and our children live in a house that is solely in his name.  We've been married for over 18 years and have lived in the house for a little over 12 years.  In the event that he passes away, does the house automatically come to me?

A - It depends on where you live.  According to Al Fazio of Capuder Fazio Giacoia, LLP, if your husband dies without a will the laws of the state in which he resided would control.  If he lived with you in New York State, you as his lawful spouse would receive the first $50,000 of assets with the remainder of assets being transferred fifty percent to you and the remaining fifty percent divided among your children.  If your husband dies with a will, the document would be probated in the state and county where he maintained his principal residence.  It's a long and expensive ordeal which can easily be avoided by transferring the house from your husband to both of you as husband and wife. 

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Q7 - What the pros & cons of a short sale and what advice do you have for someone who wants to purchase a property in a short sale?

A - Short sales are a great deal for buyers because the homeowner needs to sell their house in an attempt to avoid a foreclosure.  Before they list their property, the homeowner needs the approval of their lender and the bank is quite willing to accept a cheap price.  The downside in buying a short sale is you need to be certain the homeowner really does have the approval of their lender and you'll need to allow extra time before closing to allow for the bank to process the sale.

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