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Question: I was wondering if there's any insurance program that would protect me if the price of my house goes down. If so, who offers one and at what price? I don't want to buy a house and then have to sell at a substantial loss, and an insurance policy would protect me from major losses.
Answer: I know of no such insurance policy for residential homes, but the search for less risk is not unreasonable.
On Wall Street, brokerages and private bankers seek to offset risk by hedging their bets with exotic securities and derivatives, effectively types of insurance policies designed to ward off big losses. Looking at recent headlines you can see that a lot of hedges have not worked and some have lead to massive problems. There is an argument to be made that in some cases big institutions would have been better off without hedges.
The dull reality is that every investment represents risk, and every decision not to invest represents the risk that you may be missing out on potential profits.
Heads you have risk, tails you have risk.
Question: Can you answer a question regarding a reverse mortgage? If the home has depreciated in value and is worth less than what is owed, what is done? Is the home put up for sale still and sold at a lesser price than what is owed? Is the balance forgiven by the bank or does the estate pay the balance?
Answer: The most common reverse mortgage -- the home equity conversion mortgage (HECM) insured by the FHA -- is non-recourse financing. This means that the debt can never be greater than the value of the property. If the property sells for less than the loan balance the lender cannot go after the borrowers, their estate or heirs.
With an FHA-backed reverse mortgage HUD will pay the lender in the event of a loss. For further information, see my blog, BestReverseMortgage.com.
Question: I am one of the recent job cut victims; however, over many hard years I managed to save some money, a couple of hundred thousand dollars. I do not own a house. So, do you think it's a good idea to buy a house with big chunk of down payment?
Answer: You first should be congratulated for saving. That said, it's first a good idea to divide up the money so that it rests in several accounts which are each fully insured by the federal government.
The money that you have must be handled with great care. Essentially you are in the position of someone who suddenly inherits a lot of money -- it's tempting to spend but prudence is necessary.
Buying a home with a lot down -- and then not finding a new job and failing to make your payments -- could lead to foreclosure and bankruptcy.
Most probably you are best served by not doing anything until you have found new and long-term employment. Also, it would be wise to learn more about real estate, so take the basic real estate licensure class in your jurisdiction. This will tell you a lot and also allow you to get a real estate license and perhaps a new career.
Question: What happens if a seller wants to go ahead and move into a lease-option agreement, but wants to hold off acceptance until her lawyer reviews it?
Answer: Around the country sale agreements have become increasingly complex. Lease option agreements raise even more issues so the seller is right to have the paperwork reviewed by an attorney prior to acceptance.
For instance, who is responsible for insuring the property? Paying taxes? Must any of the rental money be retained in an escrow account -- speak with lenders for more information. What happens if the tenant/buyer damages the property -- and then decides not to buy? Is the property located in a community with rent control? When is the condition of the property deemed acceptable? How big is the deposit? Etc.
Written by Peter G. Miller for www.RealtyTimescom. Copyright © 2008 Realty TimesAll Rights Reserved.
