Q & A with Barbara Corcoran

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Q1 - I'm a single mom who wants to buy my first piece of real estate, but my credit isn't all that good. I currently have my own business and work as a teacher's assistant, and I'm cleaning my debt up slowly. I want to buy a house or brownstone, but my friends tell me to invest in a coop or condo which have fewer responsibilities than a house. Which one should I buy?  And should I even contact a Realtor now with my not so good credit?

A - Your friends mean well but they don't know what's best for you. Start by speaking to a loan officer or a mortgage broker to find out how much you can borrow based on your income and credit history. Then give your Realtor a realistic budget so she can lay out your options - townhouse, condo, coop, or even keep renting!  But act fast because first time buyers can receive an $8,000 tax credit as part of President Obama's new stimulus plan, but you have to buy before the end of 2009.

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Q2 - My husband and I recently reached the end of the initial 4.5% fixed rate period on a 7-year adjustable rate mortgage (ARM), and our payment has adjusted up by around $400 a month.  My husband wants to switch to a 30-year fixed rate loan at 4.875% which would increase our monthly payment by an additional $500.  I have concerns that we will be refinancing to get a larger payment.  We have about $200,000 equity in our home and we will probably stay here for another 10 years.  What do you recommend?  

A - Your husband is right.  Interest rates are at historic lows so they're more likely to go up, not down, and a 30-year loan at 4.875% is an incredible deal!  You've already felt the payment shock of an ARM increase, so avoid it again by locking in your fixed rate now and you and your husband will more than recoup the refinancing costs over the next ten years.
 

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Q3 - My ex-boyfriend and I bought a house together twelve years ago.  Long story short, it was a big mistake.  He took out the mortgage with his name only, but both our names went on the deed and I put in all the money for the down payment and closing.  He's never lived here and I've paid for all the improvements, fix ups, even structural repairs.  And I make the monthly mortgage payments.  I've raised my kids here and I've come to love this house.  I've asked my ex to turn the mortgage over to me, but he refuses, even though he's essentially abandoned the property and refuses to deal even with the NYC Department of Health fines for lead paint, and they're sending the letters to me!  Someone told me that if the "landlord" does not do anything on a piece of property for at least 10 years, he's basically lost that property.  Is that true?  Is there any way I can get the mortgage for this house in my name?

A - The issue is not so much getting your name on the mortgage as it is getting your ex's name off the deed, because he still owns his fifty percent.  According to Al Fazio of Capuder Fazio Giacoia, LLP, you should consider hiring an appraiser to determine the home's fair market value, then add up how much you invested in the property for repairs and capital improvements and subtract this sum from his fifty percent.  If your ex does not agree to the deductions, your only other option is to seek a judicial partition of the property where the court forces a sale by a court appointed referee who would figure out how much of your expenses and capital improvements you should be compensated for when the sale closes.  I realize this is not the solution you're looking for, but it's the only way to free you from any future obligations with a co-owner.

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Q4 - I really want to learn how to invest in real estate.  I've cleared everything on my credit except my student loans.  What's the best way to start investing?

A - You should start small and buy your first investment in your own back yard.  Most guys who lose their shirt lose it messing around in an area they don't know.  Buy a studio in your building, a duplex, or a mother-daughter house on the next block.  Stick with what you can afford and be clear on what you can get back.  Knowing what you're after will help you decide what kind of investment will work best for you.  Finally, think about finding a good partner.  The best partnerships combine people with opposite strengths.  If you're good with money, partner with a guy who knows people well and can judge good tenants.  If you have contracting know-how, partner with someone who can put in some cash.  If you're a wiz at finding great properties, pick a partner who's a wiz at managing them.  Most importantly, give yourself a short-term deadline to make your first deal and get started!

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Q5 - My wife and I have a 900 sq ft, two bedroom, one-and-a-half bath duplex condo that needs some renovations. We have a limited budget and want to spend our dollars wisely. There's a small half bath in the entrance to our galley kitchen midway between the living/dining area. I want to remove the small half bath and open up the kitchen to living space and include a center island. My wife says we'll reduce the value of our home by getting rid of the bathroom.  What do you suggest?

A - Your wife is right.  You never want to decrease the bathroom count in a duplex where the full bath is probably upstairs. Get creative and brainstorm with a designer or contractor to come up with other solutions that preserve the half-bath and create the impression of a more open kitchen. Alternatively, consider renovating one or both bathrooms instead of the kitchen because, like kitchens, these are the spaces that can deliver the most bang for your buck.

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Q6 - Is it a good time to refinance?

A - Rates are cheap now and it's a great time to refinance.  But whether it's a good time for you to refinance depends on several things, including how long you plan to stay in your home, how much is still left on your mortgage and what the closing costs would be on your new loan.  If you have an ARM, it's a great time to refinance into a fixed rate mortgage while rates are low, and you'll sleep better at night knowing your rate is set for the long haul.  If you do refinance, start by shopping with your own lender first and try to negotiate the closing costs.  Most lenders will do so to keep the loan.

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