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Ask Our Broker Don’t let debt
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Controlling your credit
is key to earning your
I’m Planning to Sell My lender’s trust
Rental Home to My Tenants.
BY CHARLES SCUTT
Do I Need an Attorney? CTW Features

Q: I’ve got a rental house that I’m WHEN YOU’VE MADE UP YOUR
planning to sell next year. I have good mind that it’s time to start the
long-term tenants who love the house house-hunting process, don’t
and want to buy it. I’m planning an as- fall into the trap of putting the
cart before the horse, say the
is sale. I will not be using a real estate experts. Getting your finances
broker because I already have a buyer. I in order and managing your
will use a title company to handle clos- debt before you start shopping
ing. Since this is an as-is sale, do I need inspections? for homes and mortgage
Do I need a lawyer for the paperwork? lenders can put you on a faster
track to home ownership.
Why is it important to get a
A: You have a good situation in the sense of ready buyers handle on your debt early in
who know the property.At the same time, regardless of the process? Because “the mort-
who is buying, you need to follow the necessary standards gage lender will be reviewing
in your jurisdiction for disclosure and contract require- how well the prospective
ments. For this reason you should have assistance from a home purchaser manages pay-
real estate attorney. ing their bills on time,” says
Richard Schram, a manager for
Inspections may seem Consumer Credit Counseling
unnecessary, however that’s
a choice for the buyers to
Regardless of Service of Central Florida & the
Florida Gulf Coast, Inc.,
make. If they elect not to who’s buying, you Orlando.“A history of payments
have inspections, then to to other creditors is an indica-
prevent future (if unlikely)
need to follow the tion of how the purchaser will
make their payments to the
claims it would be a good selling standards mortgage lender.”
idea to have them sign a
form stating that they were for your jurisdiction “Mortgage lenders are not
interested in foreclosing on real
offered the opportunity for estate and then having to sell it
an home inspection but declined. to get back their money,” says
By any chance, did a broker find your tenants? If so, Mike Sumney, co-author of
“Weekend Millionaire Mindset:
review your agreement with the broker to see if there is How Ordinary People Can
Keep it simple: A single vase on the table and a few dinnerware on display gives your home a clean, appealing look.
any provision relating to a sale. Achieve Extraordinary Success”
As to a title company, check with your attorney; it’s the (McGraw-Hill, 2005).“They
buyers who typically select the title provider.
Out of Sight, Out of Buyers’ Minds want to make loans to people
who have demonstrated that
Q: I live on a parcel that allows me to add a sec- they can handle their obliga-
ond unit as a rental. I’m interested in exploring the Make your home look professionals also have jumped in
to help with a list of do’s and
Acevedo, a member Staged
Homes, a staging organization.
tions in a timely fashion and
not overextend themselves.”
idea, but I want to make sure it’s a feasible and wise
decision financially. I’m considering adding a modu-
spectacular when it’s don’ts. Some describe themselves
as professional organizers; others
Her fees – and those of most
stagers and organizers – vary
According to Brad Stroh, co-
CEO of Bills.com, the amount
lar home. I live on a wooded lot, so there would be a time to sell call themselves stagers. Both depending on the size of the of debt prospective homebuy-
lot of land prep involved. How do I start? groups share the same goal that house and scope of the project. ers carry affects the three pri-
the practitioners do: make your Acevedo’s consultation fee is mary variables that determine
BY BARBARA BALLINGER house look so divine that buyers $225, but she charges extra for interest rates on loans they will
A: What you’re describing is often called an auxiliary- CTW Features won’t be able to resist making a doing any physical work or buy- be offered:
dwelling unit. Since you already have the land, the addition bid. ing or renting furnishings. • Your credit score, which
of a second living unit can be relatively cheap. However,

T
here is a fine line between
there are a few questions you need to ask: Does local zon- de-cluttering your house so
ing permit a separate unit on your property? If allowed, can that homebuyers can pic-
the unit be rented? If you have a separate unit, must you ture themselves living there with
their own possessions and leaving
also add a parking space? Sewage? Are there architectural some things about so they know
requirements? How much will your property taxes go up? someone else has lived in and
Next, speak with local builders.What would they charge loved the house.
While most real estate practi-
See ASK OUR BROKER, Page 2 tioners can offer you tips on
what to keep and remove, other
But the process is more art
than science, says Jaynee
Acevedo, founder of Capital Style
Home Staging, Kensington, Md.
She tries to have each room tell a
story. In one house, she recently
had some of the six bedrooms
“tell” that they could be used for
other purposes than sleeping.
One became an office, one a
nursery and one a playroom, says
The good news is that there’s ranges from 300 to 850, with
a payback.According to a Staged higher numbers indicating a
Homes survey, houses that sat on greater likelihood of repaying
the market for more than five debt.The median U.S. credit
months sold within two weeks score is approximately 725.
after being staged. Houses that • Loan-to-value ratio, which
were staged before going on the refers to how much of the
market sold in less than two home’s value is being financed
weeks. Staging also boosts equity by the loan versus how much is
See SIGHT Page 2 See DEBT Page 2

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 SIGHT
Stage to sell
CONTINUED FROM PAGE 1
nearly 6 percent, the organization
says. Of course, this is not going
to be the case in every market,
but it shows that staging does
have an impact.
So, how do you begin? Before
you call a stager or organizer, try
to look at your house through the
eyes of a buyer who has never
seen your home, say Kelly Boyd
and Terrie Konsky, co-owners of
Hometenders Network, St. Louis.
The partners offer five key R’s:
• Re-organize. Simplify each
room, remove clutter and col-
lectibles, store excess “stuff” and
furniture, and box up anything
that doesn’t enhance the room.
“How you live and how you mar-
ket your home to sell are two dif-
ferent issues,” says Konsky.“In my
own living room, I have two sofas
because we like to lay on them,
but if I listed it, I’d want to make
the room look bigger and might
replace a sofa with two chairs.
Most people have too much fur-
niture,” she says.
• Re-arrange. Moving furniture
helps you find new, appealing
DEBT
Score the best loan
CONTINUED FROM PAGE 1
paid for in the down payment.
• Debt-to-income ratio, which
is the percentage of the borrow-
er’s income that goes to pay fixed
monthly debts, which includes
credit-card debt, auto payments,
student loans, etc.The higher the
debt, the more risk and the less
ability to obtain a lower interest
rate.A debt-to-income ratio of
higher than 55 percent is
frowned upon by lenders, while a
ratio below 35 percent is consid-
ered excellent.
“Typically, the monthly mini-
mum consumer debt payments of
a borrower should not exceed 10
percent of their gross monthly
income,” says Ron Cahalan, a
Gilbert,Ariz.-based mortgage-lend-
ing analyst.“The borrower must
have a grasp of their debt-to-
income ratio, along with what
kind of house payments they are
comfortable with making.”
Sumney says the No. 1 type of
debt that lenders scrutinize is
consumer debt.Any debt that has
space with better flow.“In a mas-
ter bedroom, you need to see the
bed and want the room to be a
sanctuary without chaos,” Konsky
says.
• Re-assess. Clean-sweep the
contents of your home. Decide
what to keep, sell or discard. In a
$1.5 million house in suburban
St. Louis, the women gently told
the owner her photos had to go.
“She acted like we had stuck a
knife in her,” Konsky says.“We
told her to box them up and
open them up in her new home
like presents,” Konsky says.
• Re-accessorize.Add hipper
accessories, arrangements and
colors. One house recently staged
required changing artwork since
the frames were too light and
dated, Konsky says.
• Re-act. Many put off the task
until the market is better or the
weather improves.“There’s never
a good time, so do it!” Konsky
says.
To compensate for fees spent,
which they say average between
$2,000 and $3,000, they recom-
mend adding those dollars to the
listing price.
In addition to the initial steps
offered above, consider the fol-
lowing 10 points provided by
Julie Dana, an accredited stager
to be paid from your salary, with
the exception of home mortgage
debt,“is an indication that you are
living above your means,” he says.
“All credit-card debt, car loans,
boat loans, department-store debt,
etc., represent commitments of
your future income to pay for
something you’ve already pur-
chased.This negatively affects
your future ability to pay a mort-
gage loan.”
Additionally, Schram says,
lenders evaluate your capability
of obtaining a loan by exploring a
variety of indicators, including
your monthly income, occupation
and length of time with your
employer (two or more years is
ideal), homeownership status and
history, and how often you’ve
moved.
Before initiating the home-
shopping process, borrowers
“should track all their spending
for at least a three-month period,”
Cahalan says.“Ask yourself if you
can cut any of those disposable
expenses for luxury or entertain-
ment, or is that a part of your
lifestyle that you enjoy [and]
don’t wish to change? If so, it
should be a factor in your budget-
ing decision on a home payment.
and co-author of “The Complete
Idiot’s Guide to Staging Your
Home” (Alpha Books, 2007):
• Go through your front door
as a buyer might. Check curb
appeal from the street, then enter
your house to make sure it offers
a great first impression.
• Remove or bundle wires.
Keep cords and wires neat and
tidy, particularly those coming
out of TVs and computers. De-tan-
gle messy ones and bundle them
using cord organizers.This sends
a message that your house is well-
cared-for.
• Display only the latest appli-
ances.A bulky computer monitor
may look dated; displaying a neat
notebook shows you stay up to
date. People will transfer that
message to your home, Dana says.
Remember the rule of three.
When it comes to small appli-
ances, only leave out your three
favorite ones.
• Keep shelves half full. Clear
shelves and closets so there are
plenty of room, particularly on
closet floors.“Buyers want to
know they’ll have room to put
their things since many move
from smaller homes,” she says.
• Clear coffee tables.Again, go
for the de-cluttered look. Replace
objects with a few high-end, cur-
Are any of your typical living
expenses being paid by credit
card, and are you making only
minimum payments on those
credit cards? If so, those cards will
never be paid off.”
Diane Weklar, director of mar-
keting for CreditXpert, a Towson,
Md.-based credit software compa-
ny, says there are many things a
prospective borrower can do to
clean up a credit problem and
give lenders a good impression.
For starters,“paying bills on time
proves responsibility.Also, keep-
ing credit debt at or below 50
percent of the credit limit and/or
loan amount on each account
generally improves a consumer’s
credit standing.”
Utilizing credit to make pur-
chases and then making on-time
payments “demonstrates responsi-
ble financial behavior,”Weklar
says.“After all, if a consumer with
credit account never uses them,
lenders lack sufficient credit his-
tory to judge his or her ability to
manage credit.”
Likewise, it’s crucial to review
your credit report carefully and
fix any errors or omissions you
spot, says Weklar.“Credit reports
may lack essential information or
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rent magazine issues. For a
kitchen island, put out a nice
bowl with fruit.
• Remove religious and politi-
cal items. Now is not the time to
get embroiled in a heavy discus-
sion.“You want to welcome
rather than offend buyers,” Dana
says.
• Eliminate what’s passé.
Wallpaper patterns and color
fade in and out of favor, so
remove it, especially floral paper
that makes many men uncomfort-
able, she says.
• Discreetly display a few
homey touches. Place patio furni-
ture outdoors; put a few place-
mats and plates on the dining
room table, and set out a bouquet
of flowers.
• Incorporate sound and light-
ing. Play soft music from your
area’s favorite radio station.Turn
lights on in every room.
•Clean, clean, clean. Location,
location, location may be the
most important real estate
mantra, but clean, clean, clean is
right behind.
© CTW Features
include incorrect information.
Furthermore, what one credit
report includes, another may
omit.Verifying that all data is cor-
rect and current builds consisten-
cy among all credit reports.”
Under the Fair and Accurate
Credit Transactions Act of 2003,
all Americans are entitled to a free
copy of their credit report once
every 12 months from each of the
three major credit-reporting agen-
cies: Experian, Equifax and Trans
Union.You can obtain your com-
plimentary report by visiting
www.annualcreditreport.com,
which is the only authorized, offi-
cial site for consumers to access
their credit report online for free,
or you can request it by phone at
877.322.8228.
With either method, you’ll be
able to order reports from all
three credit bureaus at the same
time, which offers the advantage
of comparing the reports all at
once, or at different times
throughout the year.
Any account that has been
placed in collection is a red flag
to lenders that should be resolved
prior to applying for a mortgage.
“[It] can doom your chances of
getting a loan,” says Sumney.“If
Ask Our Broker
CONTINUED FROM PAGE 1
to construct the unit you want?
Lastly, speak with local real estate brokers. Is there a
ready rental market for the unit you propose to build? What
rental range is reasonable? If you sell the property, would
the additional unit add enough value so that you could re-
coup your investment?
Q: My daughter and her husband are in the middle
of a divorce. They purchased a home 18 months ago
and owe $97,000. Her husband is insisting that
either the house is sold or that my daughter buy out
his interest.
My daughter makes $20,000 a year, and I make
$78,000. The lender who financed my home for
$100,000 says my daughter has to qualify for a loan
with her income – mine cannot be included in the
calculations. What can I do?
A: Check with other lenders to see what other financing
is available and ask about co-signing.Also, meet with a
divorce attorney.Ask if the existing loan can simply be con-
tinued by your daughter under the Garn-St. Germain Act.
Some cautions:When you co-sign a loan, you are responsi-
ble for the entire debt – not just part. If the loan on your
daughter’s home is not paid the property can be fore-
closed.Although it may be a difficult option, you need to
consider whether your daughter is better served selling the
property, getting her share of the profit and then perhaps
moving in with you.
If the property must be sold, can everyone wait and sell
after two years? That way the residential capital-gains write-
off will shelter profits for both your daughter and her hus-
band? Also, if you co-sign the loan, will you need to be on
the title to take an interest write-off? Speak with a tax pro-
fessional for details.
As this is written, a $100,000 fixed-rate loan at 6.25 per-
cent will cost $615 a month for principal and interest over
30 years. In addition, there will be property taxes and insur-
ance expenses.You can have a lower monthly mortgage
cost with an interest-only loan or option adjustable-rate
mortgage, but low “start” payments ultimately will be
replaced with fully amortizing payments, which in some
cases can double introductory monthly costs. Unless you
are readily able to pay the higher potential expenses, these
loans cannot be recommended.
© CTW Features
Need real estate advice? Peter G. Miller, author of “The
Common-Sense Mortgage,” would love to hear from you. Send your
questions to peter@ctwfeatures.com
you have accounts like this on can repay on a credit card.
your credit report, you would be “Only charge what you can
wise to focus on clearing them up pay off when the bill will be due,”
before even applying.” she says.
Lastly,Weklar recommends © CTW Features
never charging more than you