Marketing Focus: Where do you spend your time?

Yesterday morning I was at my networking group meeting. This is not the normal Letip or BNI group it is more than that for me. It is called the Christian Business Roundtable. We are group of men that share the same Faith gathering to sharpen each other and hold each other accountable in business and in life. It was my second meeting and my very first formal meeting. Each meeting it is practice of the group to have a Best Practices portion where we can share and expand each others business arsenal if you will. Today the Question was:

You just sold your business to a conglomerate and have agreed to remain for a few months as a consultant. You will receive 100K bonus if you can increase sale by 20% in the next six months but you have been allotted only a limited increase in your marketing budget and no media advertising budget.

You have gotten together with an Advisory Board to give you straight talk about ideas to drive traffic. Start getting the advice now!

• What “out of the box” marketing steps can be taken in: Special Promotions, Network Marketing, Newsworthy Press Release, Low cost Direct Mail etc.
• What steps will drive more traffic to your product or service?

As I left that meeting I had so many ideas to work on for my business but the one that stuck out was based on affiliate marketing. When market others services our reward internally is great. In addition external reward via increase in our business is nearly always the result. However, I do not want to rest on my own understanding. I realized that Facebook and Twitter have given me a large audience of business professionals. These professionals that I have come to know are always thinking outside of the box to drive more traffic. So I figured I would ask my advisory board.

What steps would you take to increase your revenue by 20% in six months? Share them hear with all of our readers and watch the explosive power of two or more.

Don’t take my word for it:

“Two are better than one, because they have a good return for their work: If one falls down, the other can help him up. But pity the man who falls and has no one to help him up!” Ecclesiastes 4:9-10

***** This information is not my own. It was borrowed from the Christian Business Roundtable that I am involved with. The post here is meant to be thought provoking and to generate a massive brainstorm session amongst a group of professionals. We all can always use a jump start of fresh ideas.*****

How is my Credit Rated? Part 3

As part of the five part series on credit rating Michelle Luker takes a moment to look at the third largest weight on our credit.

First let’s take a moment to recap. In the first two parts of the series we found out the following:

• 35% of the score is based on how you handle your debt obligations

• 30% of the credit score is derived from your revolving balances carried on accounts as they pertain to your debt utilization ratio.

In Summary we learned that paying our bills on time mixed with a healthy balance of debt makes up 65% of our score. That is 2/3 of what makes up our credit rating. That leaves three remaining items that comprise only 1/3 of our score. Now don’t make the mistake of minimizing the remaining three factors in the series because they are only a small portion. So the third important factor in our credit score rating is the following:

• 15% of the score is derived from the average length of time you have had credit.  The longer an account has been open, the better.  Never close a credit card account; leave it open with a zero balance.  You actually reduce your score by closing older accounts as your average account age will not increase in the future as quickly.

Two things can happen when you close an old card. Your debt utilization ratio which we learned about in the second part of the series is decreased and the average length of time accounts have been established is also decreased. So two things are happening from one simple action that we believed would be for the best. The trick though is too make sure the cards get used because if they go unused forever without activity it will decrease the overall impact of the card. After all it is a credit rating and that would require credit to be used.

New accounts obviously can only grow in strength over time. Many times when you pay off a mortgage or car note that you have been paying on for a long time your score will go down. Then the new debt is added. Two things have occurred the auto loan is paid and closed and the new debt has no history of payment. So you can see how this works.

Again, I want to thank Michelle Luker for stopping by California Home Strategies to offer some advice on Credit. We greatly appreciate your presence and the fabulous information that you have provided us.

For any specific credit questions do not hesitate to contact Michelle directly.

Office: 916-652-9637 Cell: 916-316-0247 Fax: 916-644-6626

Capital Credit Source, Inc. 4804 Granite Drive, Suite F-3261 Rocklin, CA 95677

Are you sitting on the fence? 3 reasons why it may cost you.

It can be argued that prices will continue to fall for the unforeseen future. Heck there is an awful lot of  notice of defaults being filed and if those are not modified they will inevitably hit the market. An influx in bank owned properties in any given location will generally lead to a drop in the overall price in the area. This happens because Banks price the properties ultra-competitively to get as many offers as they can. Once you are emotionally tied to the property they will ask for the “highest and best offer” that you can bring and ultimately sell the property for more than list. However, this price is still generally lower than the traditional seller.

So what is it that we are waiting for? The general consensus of the buyers that we are working with is:

• It is a buyer’s market - therefore I can make a deal
• Rates are low and they will go lower -  I have time to find the right property.
• Homes are sitting on the market forever- In Sacramento the majority are sold withing 90 days.

Again, this lends to the question what are we waiting for? Well based on the above consensus I find that buyers are looking for the perfect home. Many of the consumers are looking for their starter home with the mentality that it should look like the dream home.  This causes buyers to remain on the fence. Here are 3 reasons that sitting on the fence may cost you:

1. Rates Rise – There is a great chance of rates increasing in the coming months. Just in the last 10 days we have seen the average par rate for FHA increase by a .5% or more in some cases. On a 250K dollar loan an increase in the rate of .5% is about $80 per month in the payment. If the rates can rise a .5% in 10 days just think what can happen when the tides turn for the long term. An increase of 1% would be $160 per month. In most cases this will decrease the affordability or the possible purchase price. This is a 28K dollar increase over the life of the loan for a .5% and 57K with a 1% increase. The bottom line is that a 1% increase can cost nearly a years salary or more in your bottom line.
2. Home prices rise – Depending on the market you are in and the price range we are starting to see prices stabilizing. Once they begin to stabilize the market will then get tougher to get a closing cost credit as this is a sign of a switch from buyers market to seller. We have already began to see many cases that the bank or the seller is less willing to contribute to closing. If you are trying to buy a home for 250K and the seller is not providing any seller concessions you have to be prepared to bring 17K to the table. 3.5% for the down payment, 2.5%-3% for closing costs and about 1% – 1.5% for the prepaid items in advance. After your tax credit this is 9K out of your pocket. Once the tax credit goes away yo0u would be liable for 17K
3. Incentives go Away -The Fed will not give away free money forever.

AKA – Inflation will come some day. Inflation will bring higher rates. Get in while the gettin is good!

Loan Mod, Short-Sale or Bankruptcy Oh My!

Many times in today’s economy homeowners are internally wrestling with the question: Do I Modify, Short-Sell or file for Bankruptcy? Yes, you can also throw in do I simply let it go if you would like but for the sake of the post it is not included.

The answer to the question is not a simple one. Many times I find the reason that it is most difficult to decide is the lack of understanding the consequences. Each option comes with serious pros and cons that will have a long term affect on your life.

Important Questions to consider when looking into your options are:

Is my loan a recourse debt or is it non-recourse debt? - Click here for Wikipedia’s Definition of Non-Recourse Debt .

What tax consequences will I face if I execute a Loan Mod, Short-Sale or file Bankruptcy?

What are the Long term Credit Consequences?

How Much do I have to pay to get this done?

How do I find the right Loan Mod company, Realtor or Attorney there are so many? Does this person specialize?

These are only a few of the important questions that you should ask when considering your options. Let’s take a moment to explain in the most basic terms what each of the options mean:

Loan Modification – A Loan Modification is a modification to the terms and conditions of your current note. Common modifications include extending the payback period(amortization), decreasing the interest rate for a set period of time, extending the period of time your rate will be fixed, switching from an adjustable to a fixed rate option, principle reduction or any combination of the aforementioned and more. Loan modifications can be done directly through your lender(recommended) or you can hire a third party Loan Modification specialist (ask if they are approved by the Department of Real Estate). Here is a great place to start for a Loan Modification. Be careful if you get a principal reduction on your loan modification as you may have tax liability on the debt that was forgiven.

Short Sale – A short sale occurs when you sell your home for less than you owe on the property. Your lender has to agree to take a loss for the amount that you will be short.  Ex – you owe 500K and the property will only sell for 400K. You are shorting the lender a 100K plus Real Estate commissions. This is where it can get tricky. If you have a first and a second on the property it is imperative that you consult both a CPA and an Attorney or qualified Real Estate agent. Depending on the type of debt (recourse or non-recourse and purchase money or refinanced loan) there can be tax consequences that can hurt you bad come tax time. See what happens is the amount that you are forgiven by the lender 100K in our example will be treated as income. The lender will 1099 you for the amount that you shorted them and you may have to pay income taxes. There is also other potential tax ramifications. (Consult your CPA as I am not qualified to discuss your tax liability. The above are merely for illustration and example purposes.) If the debt is recourse debt the lender may also come after personal assets that you may have. If the debt was purchase money in the state of California a bill was passed that for a short period of time they will forgive the debt without the tax consequence. Debt must have been purchase money. Will take care of tax consequence but if it was Recourse debt this does not mean the bank will not try for personal assets. Again please see qualified accountant and/or Real Estate Attorney for legal advice. If you are considering a short-sale make sure that you seek out a qualified referral. There are many agents out there that understand the process and will do an extraordinary job for you.

Bankruptcy – In my opinion, this is the last option that I would seek out. My opinion is merely that but in Dave Ramsey’s Total Money Makeover he too advises strongly against this option. In the last few years new Bankruptcy laws have made it harder to file for bankruptcy Chapter 7. Credit recovery from a Bankruptcy is the most difficult of the three options. If you have one slip up post Bankruptcy it will be scrutinized and can ruin your chances of future loan approval. More than that the humiliation of all your items being taken away from you will remain in your mind for a long time. However, this could be the option that best suits you. Chapter 7 is a complete wiping out of the debt. You can apply for a Mortgage 24 months after the Bankruptcy is discharged as long as you have re-established credit. Chapter 13 is the reorganization of debt to a more affordable payment. You can apply for a home loan after 1 year of timely payments on the debt but the loan must be approved by the trustee. Can a home loan be included in a Bankruptcy? In short this is called a Cram-Down and has been argued for and against in light of the economic crisis. Wikipedia gives a good explanation of where we stand but this is continually changing as the need changes and as the voices are heard. For current information please consult a Bankruptcy Attorney.

So the question remains: What option is best for my situation? As you can see the answer is not very simple and will be very different for each family. Please do not take the advice of a friend who short-sold and says this is the right thing for you. Consult your local professionals. Proverbs 24:6 “So don’t go to war without wise guidance; victory depends on having many advisers.” – Basically what is being said is get the advice of many wise professionals. Sift through the information find the consistencies and inconsistencies and determine what route works best for your individual situation.

****Again, I will say that I am not legal counsel and what is posted is meant to be illustrative and thought provoking only. Always consult legal counsel regarding your specific situation. If you need the name to someone that may be able to help you I can always refer you to quality professionals in their respective industries********

State Workers: 3 quick tips to make your home purchase smoother.

It’s not a secret state workers wages are being messed with! If you are a State Worker and you are looking to buy a home in today’s Market I suggest that you do the following 3 things to help make your home purchase smoother:

1. Get a Verification of Employment upfront – The VOE is something that your Loan Officer can walk you through. It is a complete breakdown of your income over the last two years and the current reflection. If you receive OT, Bonus or other compensation it should be spearated out on your VOE. This will help to take averages over time. Be sure you Employer uses the remarks section for anything out of the ordinary and states that current income reflects FURLOUGH!
   
2. Qualify with only your base Income when possible – On the VOE (verification of employment) there is a box for overtime and bonus. I am certain that the state will not mark the box that says likely to continue. With that the underwriter will not use it. This can significantly reduce what you qualify for. To avoid having to argue with an underwriter about this type of income don’t use it. The Underwriter is always right (so they think).
   
3. Check In Frequently with your LO to make sure that the approval amount still stands – If it takes a while to find a home which is common make sure that you and your LO communicate any and all changes. As your pay is changing so are rates. You can never be over cautious. It is to the benefit of each of you to make sure that all is well and still stands.

There are many other things that you can do to make sure that as a Satte Worker your approval stands. These are only a few of the suggestions and tips that I offer. If you qualify well within your budget 25-35% Debt-to-income then changes in your income will have little to no impact on qualifying. Be sure that you plan ahead not for what your pay will be when the furlough ends but what it may be in the meantime. The State is a mess and it may be a while before we have it ironed out. We will most likely be paying more in taxes with less wages for some time.

Property Taxes: An Evil Necessity

Leave it to me to watch TV, HGTV, and come up with an idea for post. Yes, I really like to watch the HGTV channel for many purposes but mainly because they have Real Estate related shows. The one that I was watching this weekend was House Hunters International. House Hunters International is a show that has homeowners from the states looking to buy homes abroad. Many times they are looking for a retirement home.

The couple that I was watching was from New Jersey and they were looking for a home in the Caribbean. Specifically they were looking for a home on the fabulous island of St. Martin. The island has been shared for over 350 years by the Dutch and the French. The island itself is super beautiful and both sides of the island have their own unique offerings. The show allows the couples to pick between three homes. They searched two on the dutch side and one on the French. From what I have read the French side of the island has a more elegant upscale feel so I was wondering why they were looking at more on the Dutch side. I figured that it was simply the cost of the home. I was wrong. It was the Property Taxes!

Before I expand on what I am talking about I will first say this. We are extremely lucky in the state of California when it comes to property Taxes. Why do we even have property taxes? Property Taxes are the principle source of revenue for cities, counties and the school districts. Property Taxes are assessed in California as approximately 1% of the value of the home annually. However, there may be another value up to a .250% for direct levies, special assessments or voter approved general obligation bonds. This would exclude Mello Roos. Mello Roos can be quite expensive and sometimes is very nominal. It is specific to an area as you read in the link so ask your professional if this affects your home. The only thing is that since the prop[erty values in California are so high we are still ranked #10 in the country for Median Tax rate. We are also 17th when it is expressed as a percentage of income.45th when we look at taxes as a percentage of the home value. To me the latter is the most important. If we pay taxes based on the value of our home the taxes as a percentage of the value is important. 45th is only one way that we are lucky.

So why are we so lucky then? Well before I go back to the French side of the Island let’s talk about another Big State. Texas property taxes are 3% of the purchase price. This ranks them #2 behind Wisconsin when you look at property taxes as a percentage of the value of your home. When you think about it 1% of the value of the home is not that bad. Now that home prices have been coming down this makes this a great thing.

French side of St. Martin – The main reason that the the couple on the show decided to choose a home on the Dutch side of the island aside from the language barrier was Property Taxes. Based on what the Realtor stated the Property Taxes on the French side of St. Martin were 10-12% of the purchase price. What? This would rank them #1 by a long shot. The Purchase Price was over 500K but for the example let’s look at 500K. 10% of the purchase price is 50K annually for property taxes.  This would be over 4 thousand dollars a month and on top of that he stated that closing costs would be 7-13% another 50K. I almost fell out of my chair. Unless I was missing something which I very well could have done as I was about two or three glasses into a bottle of wine that is unbelievable. The only thins that I could hope is that was a one time fee but I don’t think I am wrong.

Conclusion – We are very lucky with our property tax rate here in California. We should feel real good about where we rank in comparison to other states and be super happy when we compare ourselves to St. Martin! Property Taxes are an evil necessity but consider the alternative!

Pride of Ownership. Has it been Forgotten?

When I was a kid I had quite the He-Man collection. I remember that every time that I picked one up to play with I had to put it right back in it’s spot when I was done. That included cleaning of the character and appropriate placement of the weapons. They were mine and I was going to make sure that they stayed in the very best condition possible.

25 Years later I was able to hand over that very same collection of He-Man toys to my son. I am not so happy to report that he does not treat them in the same manner that I did. He has broken a few and left them to be stepped on in the middle of the night.

After several weeks of watching the deterioration of something I worked so hard to keep up for so many years I started to ask myself; What has happened to Pride of Ownership? Has It been forgotten? We live in a generation that is spoiled rotten. As soon as we are tired of something we discard it or let it go to crap. I am absolutely guilty of this. I hate my car and because I do not like my car I fail to take care of it. The problem with that is it is a BMW and they are very nice vehicles. I should feel lucky to have it yet I don’t act that way.

Have we gotten that way about our houses? My grandparents generation bought a home and they lived in it for years to come. They did small upgrades over time as they were needed. My parents generation bought within their means and they have upgraded overtime as they could afford to do what they wanted to do. My generation upgrades immediately more than necessary and sometimes to the point that we have over-improved for the area. Then we get tired of the upgrades because they are not the latest and greatest until we can replace them. I have seen beautiful Hot-tubs go to waste. I have also seen ;landscape go by the wayside for no reason.

When we fail to take pride in what we have we not only fail ourselves but we fail our nbeighbors. We are briniging down their value as well. We fail to set an example for others that we must feel blessed for everything we have. I know that it is time to look in the mirror on this as well as have a sit down with the kids. Our house becomes engulfed with toys that we do not play with all because with thought we needed more. Less is More. Take back the Pride we once had in ownership. Treat everything we have as a classic Mustang. After all, it can be taken from you in an instance. Let’s learn our lesson from the foreclosure mess that we have seen and take pride in what we have so we do not have to go through the pain of losing it!

Mortgage Definitions: Note or Promissory Note

Commonly we are asked to supply a copy of our note when we are refinancing our mortgage or applying for a second mortgage. Many times as a consumer we state what is a note? So I decided to post the definition here:

Note

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Your note outlines the specific terms of the loan. When the loan begins, the maturity date, the interest rate and the sum. If it is an adjustable rate mortgage and the terms of the adjustments and if you have a pre-pay. The note can tell you a lot about your loan.

Where can I find a copy of the note?

Generally, you will have a copy of the note in the packet that the title company provided you at the time of signing. It will say not or promissory note at the top of the page. If you are ever in doubt contact your Loan officer and they should be able to guide you.

Until Next Time!

What exactly is college success?

Brad Asbury is known locally for many things stemming from his work with non-profits and his involvement in Rotary. Brad is not limited to these accomplishments but for the sake of having room to write the article I have condensed them. Brad agreed to share one of the things that he does with us here at California Home Strategies regarding college funding. Since, many homeowners are required to use equity in their home or finance College I wanted you all to be aware that you have other options. Enjoy the article and subscribe as Brad will be back with more information.

For many, the question is, will my son or daughter able to get into the college s/he wants to attend? That’s college access. College success is attending the most appropriate school for the career of your choice, graduating in the least amount of time (a four-year degree in four years), graduating with the fewest loans and out-of-pocket expenses, and being “successful and happy in your career.”

Getting a good college education has become more and more difficult recently. Colleges are more competitive with admissions and funding is seemingly harder to get. That is one reason why it is wise to work with a coach who specializes in these areas so your student has a leg up on the competition. Because that is exactly what it is, competition.

Organizations like the one I consult for, The Access College Foundation have turn key programs designed to give your student the tools necessary to achieve college success. They are also designed to minimize out of pocket expenses and maximize financial aid received for college funding.

We start from the beginning, identifying a career appropriate for your student, raising their SATR/ACT test scores to make them more attractive for the selected colleges, identifying the 6-8 best colleges for the chosen profession, helping fill out the admissions forms, filling out the all important financial aid forms, lowering the EFC(Expected Family Contribution) when possible, helping with the negotiation of awards, and most important, keeping both the student and the parents informed every inch of the way. We have a plan, a roadmap to college success for you to follow.

College is serious business and needs to be treated as a business. The value of working with an experienced college planner could be the difference between a successful college experience and a mountain of debt. I enjoy working with families to achieve winning results and helping launch successful careers.

It all starts with college success.

Brad Asbury
916-607-3104
basburycsa@yahoo.com

Consultant for the Access College Foundation-A member of the American College Planning Foundation and the California Association of Student Financial Aid Administers

How is my Credit Rated? Part 2

Michelle Luker is back in the second part of a five part series regarding “how your credit is rated.” In part 1, Michelle explored how delinquency makes up 35% of your score. Today Michelle touches upon Debt Ratio which makes up the next 30% of your score.

30% of the credit score is derived from your revolving balances carried on accounts as they pertain to your debt utilization ratio.

Revolving credit cards make up a very significant portion of what ultimately determines your credit score. Your total revolving credit utilization ratio is calculated as follows: Divide your Total Open Revolving Credit Card Debt into your Total Open Revolving Credit Card Limits gives you your Credit Card Utilization Ratio.

Example: $15,000 of open credit balances divided into $75,000 of available credit card limits = 20% Credit Card Utilization Ratio (debt ratio for short).

The closer to zero you’re Credit Card Utilization Ratio is, the better your credit score.

Having a 0% debt ratio is ideal, so you want to keep your credit card balances as low as possible to maximize your credit score. If you are able to do so, you should pay off or pay down your credit balances to enhance our score.

Another step you can take to improve your credit scores is to lower your debt ratio by raising your current credit limits. Caution: You need to approach this matter with care. Call and ask each credit card company if they will crease your card limit based on a review of your payment history with them only. INSIST that you do not want them to pull your credit report and thereby create an inquiry that will damage your score. Some creditors will do this, some will not. I do not suggest letting them pull your credit if you plan to make a credit purchase in the next six (6) months since the inquiry will decrease your credit score.

Now you know that the most important factor in determining your credit score is based on the handling of your debt obligations

Whether you pay your creditor on-time is 35% of the score.

You also know that the second most important factor in determining your credit score is determined by the amount of debt you carry as it pertains to your revolving debt ratio.

Revolving account debt ratio is 30% of the score.

Contact Michelle Directly to see what steps you may take in bringing your score up to the highest levels.

Office: 916-652-9637

Cell: 916-316-0247

Fax: 916-644-6626

Capital Credit Source, Inc.

4804 Granite Drive, Suite F-3261

Rocklin, CA 95677

Next Page »