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Termite Damage And Real Estate

Termite damage, no matter how small it may be, is never good for a home.  During a real estate inspection, if any termite damage is found, it will affect the outcome of the home.  In most cases, the buyer is told that the seller will fix the problem.  Although this may sound good to some buyers that the seller will treat for termites, other buyers often wonder.

Of course it’s nice that the seller will pay to have the termite problem treated, which will normally cost around $1,000 or so.  Even though the termites will be gone, you have to wonder about the damage to the structure.  In the more severe cases, damage to the structure can cost up to 50 times the cost of the treatment.  The last thing you want is to move into a home that you know has been treated for termites, only to find the structure to be in very bad shape.

If any type of damage was done to the wooden structure of the home, you may need to get immediate repairs.  While some damage may be visible, there are other types of damage that may seem invisible to the naked eye.  To find out just how bad the damage is, carpets and rugs will need to be lifted, furniture and appliances moved, walls and ceilings will need to be opened, and even some types of excavation may be needed.  This is the only way to tell the extent of the damages, especially in cases of termites.  If you don’t inspect every area of the home, you could be moving into a home that has severe structural damage – which can cost you thousands to repair.

There could also be latent damage present as well.  To determine this, you’ll need to have invasive and destructive testing performed on your home, which will performed by qualified contractors and specialists.  This will help to determine the extent of the damage and the cost of any needed repairs.  This can be very costly however, although it’s the only way to find and repair any latent damage.

Destructive and invasive testing can cost you an arm and a leg, although you’ll need to have it done if you suspect termites or know for a fact that the home was treated for them.  To protect yourself, you should always get a treatment and repair history before you purchase the home.  If you are renting the home, you’ll need get written documentation from the specialist that details the damage to the home and cost of repairs.

Before you buy a home, you should always have it checked for termites.  There are a lot of termite inspection companies out there, many of which go above and beyond to check the home for any type of termite damage.  You don’t want to buy a home only to find out that it has been infested with termites.  If you have the proper inspections performed before you make the purchase, you’ll know for a fact that you don’t have to worry about termites or termite damage.

If the inspector or contractor doesn’t find any termite damage, you should always have it documented.  This way, if termite damage does exist, you’ll have the documentation to back you up.  Termites can be very destructive to your home, especially if you are looking towards a log home.  Termites can destroy wood in little to no time at all, which is why you should always do what you can to have your home treated as soon as you suspect any type of damage.  If you know a home has been infested with termites before – you should really make sure that the structure isn’t damaged and the termites are gone before you commit to buying.

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Buyer Tips, Real Estate News, Real Estate Tips, SW Real Estate News

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Good Home Buying Tips

Welcome to the home buying market! This is an exciting time to be purchasing a home, with an array of new homes coming onto the market these is some excellent value to be found. All it takes is a little time and effort in looking and you can find your dream home for a dream price. But you should always be a smart buyer. There are those out there that will take advantage of someone who is eager to buy so, if you do your homework; the deals will follow.

The first thing you should do is get your finances in order. This involves finding out your credit score, fixing any outstanding issues affecting your credit, ensuring that these are properly released from your report, and finally securing your mortgage before you start looking. When I say secure your finances I do mean being pre-approved fully, this is different from a pre-qualification in that a pre-qualification does not “secure” you any amount of money, it is simply a judgment of whether or not you qualify to receive a mortgage.

Next, start working with a realtor that knows the area you are looking to buy in. This is a huge step so be prepared to move from merely wanting a home, to actively looking for one. Sit down with your realtor and make a list of things you require in a home. This is a list of those things that you can absolutely not be without. Once this is compiled, then list the things that you would like. With these lists ready, its time to start looking at homes. Your realtor should be able to provide you with a complete list of homes that fit your criteria, and some that come close. Also, they will be able to guide you to properties that fit your pre-approved mortgage amount.

After finding a home or homes that suit you make sure to have a certified inspector take a thorough look through the home. Have them check all questionable areas of the home. Don’t forget to have the inspector check for mold as this is something that is often overlooked. If the home passes the inspection than carry on with the offer if you are so inclined. If it doesn’t then either continue shopping, or utilize the necessary repairs as a bargaining point. Usually you should be able to have the cost of these repairs deducted from the cost of the home. It’s a good idea to bring in your own contractor or expert to get these estimates. By doing this you know that everything is above-board.

Buying a home is a huge process and one that you must be careful to handle with all due care and attention. Such an important investment can benefit you financially for years to come as well as providing safety and financial security. Don’t sell yourself short on what you buy as your home. After all, your family deserves the best don’t they?

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FSBO Tip – Don’t Do It

My Number one FSBO Tip? Don’t sell it yourself! A “FSBO,” or house “for sale by owner” can sell fast, and for as much as it would have if listed with a real estate agent. Sometimes – but not normally. Consider the following ten points.

 1. Buyers work with agents. Most look at MLS listings. Sell it yourself, and they won’t see or hear about your home. How do you find that “right” buyer or get top dollar when you’re invisible to most of the market?

 2. Your FSBO will get lower offers. Naturally, the buyer thinks you’ll take less because you’re saving the commission! Save a $10,000 commission, get $10,000 less – where’s the advantage in that?

 3. Advertising is expensive. The costs the real estate office normally pays are yours if you sell it yourself. How much could you spend on ads if it takes a year to sell?    4. They have the resources. And you don’t. Agents have books of sold properties to look at, for example, to determine the best price for your home. You can dig through county records, but you do have to value your time too, right?

 5. They know the market. What’s the target market for your house? Young couples, retirees? What features do they want? You should know these things before you write your ads. An experienced real estate salesperson will know.

 6. They know the laws. What about written disclosures, and who pays for the real estate transfer tax? When you sell it yourself you don’t get to ignore the laws.

 7. Are you a good salesperson? Can you develop rapport and properly answer objections? Could your defensiveness scare off a buyer who criticizes your home? Think back on your own purchases, and you’ll realize that a good salesperson makes a difference.

 8. Paperwork. Will you help the buyer properly fill out an offer to purchase? An agent would. Do you have the other closing documents ready?

 9. Agents negotiate for you. When did you last learn a new negotiating technique? Can you counter-offer without scaring off a buyer? A good salesperson is trained in these skills.

 10. You may not save anything. The documents, newspaper advertising, signs for the yard – it’s all your expense when you sell it yourself. After your hard work, you may get low offers and negotiate poorly. Honestly, sellers often net less money from the sale when they try to save the commission.

Most “FSBO” sellers eventually turn to a real estate agent for help. You could learn the things an agent does, but is it worth it to spend all that time and maybe not even save any money? Don’t sell it yourself unless you really know what you’re doing. That’s my number one FSBO tip.

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Four Real Estate Investment Tips, that you can learn from Warren Buffet, and other Stock Investors

Some of the most successful stock investors ever have based their investing principles on value investing. Investors such as Benjamin Graham, Irving Kahn, and Warren Buffet, have used value investing to build vast empires of wealth.

Value investing was conceived by Benjamin Graham, and David Dodd, in their classic book, “Security Analysis”, written in 1934. Although they were talking about stocks, there is still a lot to be learnt from value investing that can be applied to other investment vehicles. This article will show four things that real-estate investors can learn from value investing…

1: Investing vs Speculating – In value investing, it’s important to make the distinction between being an investor, and being a speculator. In “Security Analysis”, it is defined as this:

“An investment operation is one which, upon thorough analysis promises safety of principle and an adequate return. Operations not meeting these requirements are speculative”.

So, there are 3 things needed for something to be an investment: – You need to have done thorough analysis. – You need to be reasonably sure that you won’t lose your money. – You need to be reasonably sure that you will make some money.

In terms of real-estate, this means that just buying and selling real-estate, does NOT make you an investor. If you’re buying properties at random, just because there is a boom and all property is going up in value, you are not investing. You are speculating.

There is nothing wrong with speculating, you just need to be aware when you are speculating, versus when you are investing.

2: Value vs Quality – Value Investing doesn’t really have any formulas, or rules. It is more of a theory, with some general principles. Because of this, there are many ways to do value investing, and different ways to apply it.

Benjamin Graham focused on buying stocks significantly below value, with little emphasis in the quality of the stock, in regards to their long term prospects.

This can be a useful strategy for a real estate investor, particularly when they are first starting out, and need to build up equity fast.

Warren Buffet still looks at the value of a stock, but puts a lot more emphasis on the quality of the stock. He only buys stocks that he thinks have good long-term prospects, with a bright future in front of them.

This is generally a good strategy for real-estate investors to move to later on, when they have built up their portfolio. Long term, well-chosen property will make significantly more capital growth than poorly chosen property, and may be worth buying even if it can only be bought at market value.

And with commercial real estate investment, it may be worth getting a lower rental yield, if this means you can have a high quality tenant, who will pay the rent reliably. This is a strategy that famous New Zealand commercial real estate investor Bob Jones has applied, with great success.

3: Margin Of Safety -“One of the most important principles in value investing is a margin of safety”.

Margin of Safety is the idea of making sure that you only invest if your calculations show that there is a significant profit to be made. There is no way your analysis can be 100% accurate, so the margin of safety gives you a buffer, to use when your calculations are slightly off, or you get worse than average luck, or any number of unexpected problems occur.

So when estimating the value of a stock, you use conservative estimates for earnings etc, to come up with the value. If your estimated value comes in at $10, then you don’t buy the stock if it’s currently selling for $9.75, because it’s too risky, and if your calculations are off, you wont be buying a bargain. If the price is currently $6 though, you might buy it, because you have a $4 margin of safety to use if you estimated incorrectly.

The same principle applies to real-estate.

Suppose you are looking at a deal, and you find you can buy some land for $100,000 and you can build a 4-bedroom house on it for $150,000.

If new 4-bedroom houses in the area are selling for $270,000 then should you do the deal? Theoretically, it will only cost you $250,000 to buy/build with a sale at $270,000 so you should make $20,000 profit.

But that isn’t much margin of safety. What if building costs blow out, and it cost more than $150,000 to build? What if you can’t sell it straight away so you have some holding costs? What if the other 4-bedroom houses in the area have much better kitchens than you realized, and you can actually only sell for $245,000?

There are a lot of unknowns here, and because your margin of safety is so small, unless everything goes right, you can quickly find yourself making a loss.

If on the other hand, 4-bedroom houses in the area are selling for $350,000 then you have a projected profit of $100,000. You can afford for a lot of things to go wrong, and you can still make a profit.

In the first case, if building costs go up by $50,000, the deal will cost you $30,000.

In the second case, because you have a much larger margin of safety, if building costs go up by $50,000 then you will still make a profit of $50,000.

Margin of Safety is a very important concept to all investors, and all real estate investors should think about it if they want to be around for the long-term.

4: The myth of Risk vs reward – Conventual wisdom says that to increase your reward in investing, you must increase your risk. This is often true, but the Magen of Safety principle can turn this around.

When margin of safety is used, a higher reward actually means a lower risk!

You can see this is the example above. The deal that is projected to make $20,000 is quite risky, whereas the deal with a projected profit of $100,000 is much safer, because a lot more can go wrong before a loss is made.

This doesn’t mean than high reward always means lower risk though. The conventual Risk vs Reward wisdom is still correct in general. So if you borrow more to buy a property, your risk and reward have increased. If you buy in a small town to get a higher rental yield, your risk and reward have increased.

This Risk vs Reward theory is only incorrect when directly applied to the Margin Of Safety concept. So if you buy something for $100,000 that all your analysis shows is worth $200,000, then your reward has gone up, while your risk has gone down.

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Picture Perfect: the Profit is in the Plan

As far as home improvements go, landscaping is a solid investment – in fact, a well designed outdoor project can offer a better return than most of those inside the house. Good landscaping can add between seven and 15 per cent value to your home and has a recovery value of 100 to 200 percent, so shell out now and get it back when you sell.

Many realtors will tell you that a well designed landscape will help you sell your house faster. With today’s explosion of subdivisions, where many of the homes look similar from the outside, landscaping can set your home apart from a neighborhood of clones.

But the key to a profitable landscape is the design, so start with a plan. A poorly designed layout could end up costing you more time and money: without proper planning, that lovely deck you’ve laid may crack in next winter’s frost. So before you go running into the yard with your pick and shovel, get out your paper and pencil.

First consider what you want to use the area for. If you want to have an outdoor kitchen area or pool then your design will look quite different from someone looking for a vegetable garden or a private refuge. There are plenty of garden magazines on the market; study them to get a good idea of what you like and don’t like. Even if you aren’t planning on doing the whole yard now, plan what you’d like to see eventually. Otherwise you may find yourself ripping up this year’s hard work because it interferes with next year’s project.

Plan for your level of maintenance. Think about whether you want a garden that requires a lot of work or something a little easier to deal with. After you put all this work into the design you don’t want to watch it go to waste. If you don’t have time to maintain it yourself you might want to hire someone to take care of it for you, but look into those costs before you start planting.

Which brings us to the ever popular topic of budgets – it’s important to start out with an idea of how much you have to spend, because it’s easy to get carried away out there and there’s no shortage of lovely plants, features and furniture to sink your hard-earned cash into. Be realistic: you might not be able to put in both the pool and the outdoor kitchen this year, but you’ve got your plan. You know it’s coming.

The next step is to sketch out your yard. Divide it into sections and map out what you would like where. Call your utility company and map areas with underground wires and pipes. Identify areas that have special needs (drainage issues, acidic soil, shade and full sun). Next, add the feature that need to “landscaped”, like patios, fences, fountains, pools and walkways. Depending on the complexity of your design you may want to consider involving a professional, at least to look at your design. If you are undertaking any structural projects it might be wise to have the plans vetted by an engineer. In any case, consult local building codes and do your research. You want to ensure that your landscaping is appropriate for your particular location and climate concerns.

When deciding on plants, refer back to your sketch to match your greenery with its preferred light and soil conditions. Use marking paint or chalk to mark out planned features and bedding areas in your yard. This will give you a basic idea of whether your design works spatially. You may need to play with the width of the beds or paths to make the plan more visually appealing.

Before you plant, lay your plants out in their place and take a good look. Does the layout look crowded? Try to visualize the final size of the plant. Make sure you leave them enough room, even if your garden feels a little sparse to begin with. It’s better to have a little room between them now rather than ending up with some plants being overpowered by others when they are full-grown.

And now you’re ready to go! It may seem like a lot of work to get started, but a well planned design will ensure that you maximize your investment and create a beautiful space that you (or the next owners) will enjoy for years to come.

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Wireless Alarms For Your Driveway

Those of you who want to protect your home from possible annoyances and intrusions, never miss out on a home delivery, or always be aware of someone coming up your driveway – should invest in a wireless driveway alarm.  There are a variety of different styles, with each one offering you a truly unique and innovative way to keep up with what’s going on around your property.

You can get either wireless or handheld models, which vary in detection ranges, from the average 1,000 feet for small driveways to the larger driveways which span 2 miles or more.  Some models will warn you of visitors with tones, while others use prerecorded messages.  The more advanced models on the other hand, well you communicate with visitors through the use of an intercom system, which you install at the end of your driveway.

All types of wireless driveway alarms feature a receiver and a transmitter.  Any presence in your driveway is detected by the transmitter, normally through infrared equipment, which notifies you through the receiver.  Most models will allow you to speak through the receiver, transmitting your voice through the transmitter.  If a solicitor or burglary is trying to visit your home, your voice is normally all it takes to turn them around in the other direction.

Even though the technical name is “wireless driveway alarm”, there are several uses for this technology.  You can install the equipment in your yard, out of plain view, or even use the system as an intercom for anyone who pulls up to your gate.  You can also install the system on your roof, or just use it strategically around your property.  There are several uses for wireless systems, although the intention is to alert you when there is any type of human presence or movement on your property.

When you set up your wireless driveway system, you should always place it somewhere where it isn’t easy to see.  You don’t want someone who visits your property to have plain view of your equipment, as it can easily give you away.  Instead, you want to make sure that you are alert of any visitors, yet they aren’t aware that you are using any type of alarms.

Depending on how much money you have to spend, the systems that you can choose from will vary.  There are simple wireless driveway alarms out there, yet there are also systems that can do just about anything you want.  If you live in a suburban area, you may want to go with a standard wireless alarm.  Standard alarms are best for this type of neighborhood, as they are easy to install and will immediately alert you whenever there is presence on your property.  Another great thing about these types of systems is the fact that you can act immediately without having to physically be in touch with the receiver.

All in all, wireless driveway alarms are a great security measure for anyone who owns a home and wants to protect themselves from unwanted visitors.  You can get a slew of features as well, depending on the type of alarm that you select.  You can install most alarms yourself, although the more advanced models will require professional installation.  The self installation types will come with instructions as well, so you won’t encounter any problems.  Even if you’ve never used them before – wireless driveway alarms are a great investment that will alert you anytime someone decides to visit your property.

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Tips For Stopping Spraying

Anytime your cat backs himself up to a door or other object in your house, lifts his tail, and releases urine – you have a problem.  This problem is known as spraying, and is very common with cats kept indoors.  Even though it is a very annoying problem, it’s a problem that can be solved. 

Contrary to what many think, spraying isn’t a litter box problem, but rather a problem with marking.  Cat urine that is sprayed contains pheromones, which is a substance that cats and other animals use for communicating.  Pheromones are much like fingerprints with humans, as they are used to identify the cat to other animals.

When a cat sprays something, he is simply marking his territory through his urine.  The spraying is simply the cat’s way of letting others know that the territory is his.  Even though it may make you mad and annoy you, getting angry with your cat will solve nothing.  If you raise your voice or show angry towards your cat, it can very well result in more spraying.

Cats that are in heat are easily attracted to the odor of urine.  For cats in heat, spraying is more or less an invitation for love.  Often times cats that spray while in heat results in a litter of kittens that are born in just a few short months.  Keep in mind that cats not only spray during heat, as some will also spray during encounters with other cats, or when they are feeling stressed.

Although spraying is a way of communicating for cats, the smell for people is horrible.  The good thing here is that most cats will do a majority of their spraying outdoors.  If you have an indoor cat that never goes outside, spraying can indeed be a problem.  If you’ve noticed spraying in your home, you should take action and do something about it immediately.

The most effective and also the easiest way to stop spraying is to have your cat either neutered or spade, which of course depends on the sex.  Most male cats that have been neutered will stop spraying the same day they have the surgery. If you don’t want to get your cat neutered or spayed, you should look into other options.  If you hope to one day breed your cat, you certainly don’t want to have him neutered or spayed.

The best thing to do in this situation is to talk to your veterinarian.  He will be able to give you advice, and possibly even solve the problem without having surgery.  There may be a medical problem present that is causing the problem, which your vet can identify.  You should always do something about spraying the moment it starts – simply because cat urine stinks and it can leave stains all over your home.

 

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Incorporating Science into Your Next Backyard Adventure

Your backyard is a great place for your child to get outside in play.  In addition to swimming and playing outdoor sports, your child can also use your backyard as a science experiment. If you are interested in helping them achieve this, you may want to familiarize yourself with some popular backyard activities, especially those that have a focus on nature and science.

Exploring your backyard is not only a fun activity, but it is also educational.  There are a large number of living, breathing creatures that can be found outdoors.  All children love exploring nature, but there are some who may enjoy this exploration more than others. Those children are likely to be toddlers or elementary school aged children. Since young children may need your assistance, you will want to pick backyard activities that you will also enjoy.

One of the many ways that you can incorporate science into your backyard is by studying the plants that can be found in your yard. While all backyards are likely to have a number of different plants or flowers, yours may have more. For the best type of environment, you are encouraged to explore areas of your yard that have yet to be mowed. 

Your backyard is also likely full of a number of different insects. Like plants and flowers, your child may enjoy examining these bugs. It is not only fun to see what bugs live in your backyard, but it is also exciting to learn about how they survive. There is also a good chance that your children may leave your yard with a new pet.

In addition to the living things that can be found in your backyard, you and your child may also want to examine the weather and the impact it has on the yard and everything inside of if. Backyard conditions change as the weather changes. By examining your backyard after a rainy day, your child may find that many of the plants, flowers, and bugs have either changed or retreated to safer grounds. Examining the effect the weather has on the things in your backyard is not only fun, but educational.

To make the most out of your child’s next backyard adventure, you may want to consider purchasing them some science supplies. These supplies may include, but should not be limited to containers, butterfly catching nets, magnifying glasses, picture books, and resource guides. If your child is planning on capturing a few insects, a small cage or breathable container may be just what they need. These supplies, along with others, can be purchased from most retail stores. These stores may include department stores, home improvement stores, and toy stores.

To keep your exploration focused on education, science books and nature resource guides may be a nice addition to your child’s science collection. Many books and resource guide have a focus on insects, birds, plants, and flowers.  Many of these resources will provide you with information and pictures. For a large selection of science and nature books, you are encouraged to shop online or visit your local book store.

When examining the plants, bugs, and flowers in your backyard, you and your child may want to document what you see.  This can easily be done with a notebook or a camera. By taking pictures, your child will always be able to remember their exploration adventures.  Those pictures could also be used for other crafts. Scrapbooks and collages are a great way to turn traditional photographs into something much more. 

Whether your child plans on exploring your backyard or they do so without intending to, it is likely that they will interested with what they see and learn. Incorporating science into your next backyard adventure is just one of the many things that you and your child can do outdoors; however, it may be the most beneficial.

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Following A Builder for Profits – An Example

As the real estate market begins to calm down, many worry about making a profit on their homes. Here’s an example of the “follow the builder” profit strategy.

Follow That Builder

In many areas of the country, there are builders who build hundreds of houses each year within a fifty mile radius of each other. They build entire communities, or are one of three to five builders who build entire communities around big employment centers. This is important. Hang with me and you’ll find out why.

Serendipity

The first couple I met who worked the pattern I’m talking about did it the first time almost by accident. They bought one of the first houses built-in a neighborhood that took about two years to build out. Toward the end of the two-year period, they were out for a walk and, on impulse, went into a house under construction that represented a bit of a “move up” from their home. The same builder who had built their home was building it.

The couple went to the sales office of the builder and found out that the house they’d walked through was already under contract. They were shocked to find out the price was $150,000 more than they’d paid for their home! The house was a little larger, but not enough to account for the difference. In fact, they found out their home had increased $100,000 in value.

A Repeatable Pattern

Builders usually have bright, attractive, cheerful, enthusiastic people on their sales forces. These people often have a wealth of knowledge. They know (or can usually find out) which communities the builder has built-in, is building in, and maybe even where they’re going from there. They know a lot about the pattern of price increases for various models. They have some idea of the speed of build out.

It’s also possible to take walks in a builder’s neighborhoods and ask people how that builder is to work with, if construction and “punch list” completion are done reasonably and well, and if they’d choose that same builder again under similar circumstances.

If all the information you develop is favorable, you can start to “follow that builder.” Builders usually sell the first few houses in a neighborhood for less money than any of the homes subsequently built. They’re contracted for before the streets and amenities are complete, and it takes a lot more imagination to see a charming, pleasant neighborhood where now there’s only mud and bulldozers.

Follow the builder is a strategy that has been used. If you like a particular builder, you can use the strategy to put serious money in your pocket.

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Home Equity Scams For You?

A home is the most expensive investment most people will ever own. For cash-strapped homeowners a home equity loan is a temptingly easy way to get cash. However, some home equity lenders are dishonest, and gullible consumers are at risk of losing their biggest asset. Borrowers should be wary of unscrupulous lenders and their scams to avoid losing their homes.

Financially unsophisticated homeowners, such as the elderly, members of minority groups and people with poor credit ratings, are often targeted by unscrupulous lenders using unethical lending practices.

One tactic used is called “equity stripping”. In this instance, cash-strapped prospective borrowers who the lender knows cannot met the monthly payments are encouraged to exaggerate their income on the application form to help get the loan approved. As soon as the borrower fails to meet the monthly payment, the lender forecloses, stripping the borrower of all the equity in the home. Low-income homeowners should beware of lenders who encourage them to accept loans which they cannot afford to repay.

Another tactic is the balloon payment. A borrower who is falling behind in mortgage payments is offered mortgage refinancing at a lower monthly payment. However, the payments are lower because they cover only the loan interest. At the end of the loan term, the principal that is, the entire amount of the loan is due in one lump sum called a balloon payment. If the borrowers cannot make the balloon payment or refinance, the home is foreclosed.

Loan flipping is another deceptive practice. The company holding a homeowner’s mortgage offers to refinance in order to give the homeowner extra cash, but charges high points and fees for doing so. The extra cash received may be less than the additional costs and fees charged for the refinancing; moreover, interest must be paid on the extra charges.

Home improvement scams are very common. A contractor offers to install a new roof or remodel a kitchen at a price that sounds reasonable, and offers financing through a lender he knows. Sometimes the contractor even attempts to get the homeowner to sign blank contract forms with the promise they will be filled in later when the contractor is “less busy”. Often, the rates offered are not competitive, and as soon as the contractor has been paid by the lender, he has no interest in completing the job to the homeowner’s satisfaction. The homeowner is left with unfinished or shoddy work and a large loan to pay off.

Credit Insurance Packing is the charging of extra fees at the closing of a mortgage. A homeowner and a lender come to an agreement on a mortgage, but at closing, the lender tacks on charges for credit insurance or other “benefits” that the borrower did not ask for and did not discuss. The lender hopes the borrower won’t notice this, and just sign the loan papers with the extra charges included. If the borrower questions the last-minute charges, the lender may state that the charges are standard policy for all loans, and if objections continue, the lender will claim that it will take several days to draw up a new contract, or that the bank manager may reconsider the loan altogether. Due to these last-minute pressure tactics, the loan may wind up costing considerably more than initially stated. Borrowers who agree to buy the insurance are paying extra for a product they may not want or need.

Mortgage Servicing Abuses occur after the mortgage has been closed. Borrowers get bills from mortgage companies for payments such as escrow for taxes and insurance even though the homeowner agreed beforehand with the lender to pay those items themselves. Bills arrive for late fees, even though payments were made on time. Or a message may arrive saying that the homeowner failed to maintain required property insurance and the lender is buying more costly insurance at the homeowner’s expense. Other unexplained charges such as legal fees are added to the amount owing, increasing the monthly payments or the amount owing at the end of the loan term. The lender does not provide an accurate or complete account of these charges. When homeowners get tired of these tactics and ask for a payoff statement in order to refinance with another lender, they receive inaccurate or incomplete statements. The lender makes it almost impossible to determine how much has been paid and how much is still owing on the loan.

Homeowners should avoid signing over the deed to their properties to lenders under any circumstances. If a borrower is in danger of foreclosure, a second “lender” may offer to help prevent the loss of the home, if only the homeowner will sign over the property as a “temporary” measure. The promised refinancing never arrives, and the lender now owns the property. Once the lender has the deed to your property, he can treat it as his own. He may borrow against it or even sell it to someone else. The borrower no longer owns the home, and will receive no money when it is sold. The lender can treat the borrower as a tenant and the mortgage payments as rent. If the “rent” payments are late, the borrower can be evicted.

To protect against unethical lending practices, homeowners should never agree to loans beyond the means of their monthly income; sign any documents before reading the fine print; or let any lender pressure them into signing immediately. Never allow the promise of extra cash or lower monthly payments get in the way of good financial judgment. If a loan sounds too good to be true, it probably is.

Always ask specifically if credit insurance is required as a condition of the loan. If the added security of credit insurance is desired, shop around for the best rates. Keep careful records of all payments, including billing statements and canceled checks. Challenge any inaccurate charges; many companies hope that borrowers will simply not be bothered.

Hire contractors only after checking their references, and get more than one estimate for any job. Borrowers who are financially inexperienced should consider consulting with an accountant or an attorney before signing a loan.

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Mortgages

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