Tag Archives: credit scores

Resolutions for Chicago Real Estate

So it’s 2013. Funny how that happened. World didn’t end, although for some of us we were wishing it might have done after the New Year’s Eve parties. I’m sure some of you already have resolutions that found you duking it out over a treadmill this morning. A few more never hurt, though. Here’s a few that you might want to consider if you’re thinking of moving or buying property this year.

For Renters:

Try communication before confrontation. It doesn’t matter if you talk with your landlord directly or with the office staff of a big property management corporation. It doesn’t matter how badly things escalated last year over assorted issues with your apartment. This is a new year and time to start over. If you’ve had big problems, schedule a time to sit down calmly with a decision-maker for the property and review how both sides can resolve problems in an efficient and effective way. Don’t go for the big guns like lawyers and unions until you’ve tried to talk it out first.

Seriously? Always around?

Seriously? Always around is the nicest thing on the list?

Likewise, make a point of warning your landlord if you know there are problems on the horizon. Whether it’s money problems or crowds of house guests, it’s better to notify ahead of time and work out a game plan than it is to sneak around and hope they don’t notice.

Remember, moving is more expensive than you think. (more…)

9 Experts Every Home Buyer Should Have On Their Team – Part I

Real Estate wasn’t the first industry to require a 9-person team.

First time buyers tend to focus entirely on their choice of Realtor when it comes to choosing the associates that you’ll work with over the course of the purchase and moving process. It’s their general hope that a Realtor will be sufficiently well-connected to hook them up with all the other experts that they will need to get the job done right. This is potentially true.

However, no Realtor can know every expert in every area, and very few can know precisely what issues will arise during the course of your particular search. While your Realtor may be able to make some very solid recommendations for these 10 roles, your personality type and learning style may demand someone outside of their sphere. As is always the case here at StrawStickStone, I recommend doing some research on your own to find the team members that are best at making you feel comfortable with the process.

1. Credit Counselor.

If you’re like most of the renters out there, your credit is not in the best condition. You’ll need a credit score in the high 600 range to even be considered for a loan, and in the low to mid 700’s to get a prime interest rate. According to Andrew Ross, the NYU professor who recently wrote the controversial “Are Student Loans Immoral” for Newsweek’s DailyBeast.com, 41% of the college class of 2005 is already delinquent or in default on their student loans. These former students are now in their late 20’s, what used to be prime position for becoming first time buyers. They will need help.

(more…)

The StrawStickStone Mortgage Scenario Analysis Calculator

This is my new favorite entry EVER.

Let's Play!

I've spent the past week explaining why it's so important to do serious comparison shopping and saving up before you apply for a loan. On Monday we investigated how you could save up to 35% over the life of your loan by working with discount points and down payments. On Wednesday I used a salad dressing analogy to explain APR and how it affects your bottom line. For today I've gone back to my nerdy coding roots and have made a pretty hefty calculator so you can play with the numbers yourself.

(more…)

Why Credit Scores are False Prophets for Tenant Reliability

A credit score, according to the Fair Isaac Corporation, is calculated based on a weighted average as indicated below.

Source: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

This may come as a shock to landlords. See, landlords generally look at credit scores in hopes that it will give them an easy, quantifiable way of comparing one tenant’s reliability against another, without dipping into criteria that could put the landlord at risk of a fair housing suit. Unfortunately it doesn’t work that way.

Credit scores are a pay to play racket. They get higher only if you borrow and pay back assorted lenders repeatedly. In the modern economy it’s just shy of entrapment. The best tenant is one who doesn’t engage in risky borrowing beyond their means, and is likely to have a very thin credit history. Saying that you want only tenants with high credit scores in your apartment is like saying you only want high rolling gamblers handling your stock portfolio.

Looking at that chart above, and bearing in mind that the average tenant is younger, less experienced and less wealthy than a homeowner, a large portion of the chart can be ruled out while the info that the landlord really wants is only counting towards a third of the score. (more…)

10 Things You Can Do Regularly to Save Money

Many of you reading this blog are saving up for a down payment, security deposit, cash purchase of investment property, or a similar major expense in the near future. With slim paychecks and rising expenses it can be difficult to squirrel away the recommended 20% of every paycheck.

When I transferred from property management to brokerage I knew I was going to take a pay cut for a while as I rebuilt my business. Here are some of the things I’ve done to cut my expenses. Maybe they’ll work for you, too.

  1. Don’t pull your scores – real FICO scores are expensive. But definitely check your credit report.

    Check credit reports regularly. You get one copy of your report from each of the three credit bureaus every year. I usually pull one at the start of the year, once over Memorial Day weekend and once over Labor Day weekend. The dates go in my calendar. The FICO credit scores are not free. And the Scores offered by many of the “free” credit score websites that have popped up lately are not FICO scores. They use a different scale. The free reports you can obtain through annualcreditreport.com are just a list of your open accounts, but for checking accuracy that’s all you really need.
    My Cost: $0 and 15 minutes. My Savings this year: $0, but I learned that one old collection account had dropped off of my report this year.

  2. Call insurance companies annually. Did you know that health insurance plans since the beginning of the year have had to cover preventive care 100% before your deductible? Do you even remember what your car insurance deductible is? It’s always good to check with each of your insurance providers annually to find out if you can get a better rate. That goes for homeowner’s/renter’s insurance, business liability insurance, landlord umbrella policies, car insurance, and health insurance for the self-employed. You won’t always get cheaper insurance if you call, but it’s always worth the effort.
    My Cost: $0 and 25 hours. My Savings this year: $75 in car insurance plus $5580 in health insurance plus $120 for annual checkup now covered by insurance.
  3. There are other sites out there that allow comparison shopping but they’re owned by corporate entities. Plug In Illinois is the state-sponsored site and likely to be more neutral.

    Switch electricity suppliers. Hey Chicago! You don’t have to get your power from ComEd. You don’t. It’s worth looking into other options, especially if you have central AC. New carriers in the area offer lower prices. Investigate your options at the Illinois Commerce Commission’s “Plug in Illinois” site.
    My Cost: $0 and 45 minutes. My Savings this year: About 5% off my bill plus the good feeling of knowing that my electricity is now coming from renewable sources.

  4. Track cell phone usage. Do you know how many minutes are on your cell phone plan? How about the date when your contract expires, if you’re on a contract? When was the last time you used all of your minutes or text messages? Have you been with your cell phone provider long enough to earn a new phone? Do you not know? Maybe you should check. It’s especially useful to track your voice minute usage and make sure your plan suits your current lifestyle.
    My Cost: $30 for a new smartphone last year. My Savings last year: No savings but I got a phone and a mobile broadband router for the same price I’d been paying for just voice service on my old carrier. (I’m on a 2 year contract so I’m holding tight on this until next year. The expiration date is definitely in my calendar!)
  5. Appeal property taxes regularly. I’ve discussed this at length in a prior article about property taxes. You get a window for appealing your taxes every 3 years, and under certain circumstances you can appeal outside of that window. If any home similar to yours has sold nearby you in the past year, it’s worth trying to appeal your taxes based on their sale price.
    My Cost: County filing fee. My Savings this year: About $200/mo.
  6. Always get multiple estimates. Calling around for estimates can be annoying and you always feel like you’re being a pill. However, you learn in the process about the task at hand, and businesses that won’t provide an estimate are not going to remain in business very long. Treat your bank account like it’s a business operating account. Allow yourself a certain amount of petty cash for expenses, but if a purchase will require more than your petty cash allowance then go do the proper research.
    My Cost: $0 and a few hours of time. My Savings this year: $500 on a dental treatment and $700 on an exterminator.
  7. Chicago’s got some of the best water in the world. (Lake Michigan photo by John Chimon)

    Learn to love ice water. Beverages cost more than food. This is true for most restaurants, and especially for alcoholic drinks. Pop & sugary juices are not healthy either. With the exception of my morning coffee (homemade, french press, black) I stick to ice water from the tap for most of the day.
    My Cost: My portion of the water bill in my monthly assessments. My Savings this year: At 20 cents per can of soda, at least $113.75 so far this year, plus the wear and tear on my pancreas.

  8. Shop slowly. This started with my mother’s habit of carrying items around with her in the store as a “test drive” before purchasing. She generally does not make a purchase unless it’s on her shopping list or she’s toted it around with her in the store for a while. In my case I use my 2 week “Do I need an Ipad” test on pretty much all of my major purchases before I even walk into the store. Mom has picked up on this test and was recently using it herself. She’s quite the frugalista, so I’m very pleased.
    My Cost: Quite a bit of time doing research. My Savings this Year: At least $700 on an iPad, $200 in unnecessary clothing & shoes, and $80 in makeup.
  9. Be nice. Win stuff.

    Buy low, tip high, stay consistent. I don’t want my thriftiness to hurt the individual workers. I want them to be able to afford to go shopping too. Tips are 100% take home for the laborers, while unit cost is retained by the corporation. Whenever possible, especially in the service industry, I make sure to tip high and I frequently reap the benefits if I’m a returning customer.
    My Cost: Minimal. My Savings this Year: At least $80 in free beers from grateful bartenders, plus $30 from being able to go longer between manicures.

  10. Refinance the mortgage. Much like insurance, you won’t always win on this one. However, as long as mortgage rates stay below what you currently have and you stay on top of your credit score, you have at least a shot at a successful refinance of your loan. This is the one scenario where the cost may outweigh the savings. Make sure you run the numbers before you go ahead with the refi. Check with a different lender at least once a year, or once every 3-5 years if you recently refinanced.
    My Cost: About $700 in 2010 for a HARP refi. My Savings: About $28k in interest.

Do you have a money-saving tip to share with us? Let me know in the comments!

 

Weekend Links

I figure you guys could use a weekly break from my yammering so I’ll be doing links on the weekends. Don’t know if this will continue forever but it’s worth a shot.

  • The Future is now: The Illinois legislature has approved an amendment to the Illinois Security Deposit Return Act that allows deposit receipts and statements of damages to be sent via email instead of registered post. Friend of the blog Rich Magnone gives some good analysis of the new amendment.
  • Saying nice things: I should also mention that Rich is an excellent Chicago Eviction attorney and legal advisor for landlords. His site, ChicagoEviction.com, contains a ton of good info for landlords from the legal POV. He’s thorough and practical and has excellent taste.
  • Gambling with Apartments: It’s always interesting to see what big corporate thinks of our living situation. See how the REITs who invest in large-scale apartment complexes are assessing Chicago’s rapidly rising rents and falling vacancy levels. REIS Reports has one take on the booming downtown luxury rental market, and Crain’s Chicago Real Estate Daily has another great take on the matter.
  • Oldie but goodie: over on Get Rich Slowly, a blogger talks about how ruining his credit score was the best thing he could have done for learning how to live within his means.
  • A bit of good news: Another agent in my office (Baird & Warner City North) was one of the experts consulted for a front page Chicago Tribune article on Friday. Chicago home prices break 49 month losing streak.
  • The ultimate move-in checklist: The Chicago Housing Authority performs some of the most stringent housing inspections in the area on behalf of its Housing Choice Voucher Holders, also known as recipients of “Section 8” housing assistance. They make a version of their inspection checklist available for the public. See if your apartment would pass a CHA inspection. (PDF)
  • Eviction of the week: a tenant renting out his apartment for short stays using the popular AirBnB short term rental service has found himself served with an eviction suit. Maybe he can use some of the $20k he earned from his illicit side business to buy his own place instead. Find out his side of the story at Fast Company.

Dear Piggy: How long have I got to live in my house if I stop paying my mortgage?

A squirrel recently beaned me in the head with a chocolate chip cookie. He was sitting on a run of conduit that runs above my back deck. It was about a 15 foot drop from the squirrel to the deck, and my head just happened to be in the middle. I shall believe this as it’s more comfortable than believing that the little bugger was aiming for me. Regardless, he had led the way in developing a little squirrel/pigeon commune in the rafters. It was time to either invest in helmets or call pest control.

Once the pest control fellow was finished with evicting the local fauna, the conversation turned (as it often does in my line of work) to evictions of another type.

“My girlfriend just divorced from her former husband,” went the story, “and she’s currently still living in one of the four houses that the owned together. She’s on the mortgage. He has opted to file for bankruptcy, stop paying his mortgages and wait for the lenders to foreclose on the homes. I’m worried for her – how long does she have before the sheriff puts her out on the street? Her court date with the bank is this week.”

I naturally figured this question is probably in the minds of many people, so I figured I’d take it on in public.

First of all, this is called “strategic default” – deliberately choosing to lose your home through non-payment when you could actually afford to keep it – and it really pisses me off. (more…)