Sacramento Real Estate Blog

I’ve been thinking about all the news about foreclosures.  I work here in the greater Sacramento area.  Though I live in El Dorado County, which (along with Placer County) has experienced relatively few foreclosures, Sacramento County currently has more than fifty per-cent short sales and foreclosures in inventory.  Now granted, that’s not necessarily a huge number compared to all the homes in the area, since obviously being in financial trouble triggers a sale — most folks who own homes aren’t in foreclosure, and aren’t selling at any given time.  Still, it’s enough to get my attention.

A caricature of Realtors® is that we’re always pushing home ownership on unsuspecting victims.  I think the general consensus lies somewhere between the idea that we have hypnotic powers of persuasion to lure our victims into contracts they don’t want (much like the famous Hypnotoad, shown at right) or — less charitably — that we hit people over the head with shovels to get them into our cars, then take it from there.

Those Educated Internet Buyers - What’s a Poor Hypnotoad to Do?

Unfortunately, your standard Jedi / Hypnotoad mind tricks only work on the weak minded.  Most people I meet here on the Internet have too many information resources at their disposal to be an easy mark for these unscrupulous amphibians.  That’s probably why none of my buyers has (to my knowledge) ended up in foreclosure yet. 

Still, there may be some of you out there who are just itching to do it, so for those of you with a real hankering to financially self destruct, here are . . .

Ten Easy Steps to Foreclosure

1. State your income. 
   You may have heard that stated income loans are for the self-employed.  Don’t you believe it!  Full doc loans are harder to do so your lender doesn’t like them, and I know you want things to go smoothly for your lender out of gratitude for the wonderful loan he’s getting you, right?  And you don’t mind paying the extra half point or so to go stated, do you?  While you’re at it, forget about the fact that overstating your income is loan fraud, a federal crime.  A smart buyer like you isn’t afraid of some wimps at the FBI, are you?  The more you say you make, the nicer house you can get.  That’s why they call them “liars’ loans”, after all.
2. Don’t Pay To Run Your Own Credit - Your Lender Will Do It FREE!
   Here’s the thing.  If you run your own credit, you might conceivably talk one or more loan officers into checking into different loan programs for you.  That’s not good.  This might educate you as a consumer, and you might find eventually bump into a lender who’ll explain things to you.  Learning is the first step on the road to making stupid loan payments on a conservative loan package.  How are you going to get foreclosed on if you make loan payments?  Huh?  Plus, running your own credit doesn’t count as an inquiry, and your loan officer is counting on you worrying about making multiple inquiries, so letting them do it free for you locks you in quite nicely, doesn’t it?  So stay away from sites like MyFico.com.  I’m not even going to link to them because you’ll only end up running your credit and getting confused.
3. If your lender tells you you can afford the house, you can afford the house.
   Although most knowledgeable foreclosure-philes generally frown on talking to more than one lender because one or more of them might turn out to be ethical, one thing you should do is get as many opinions as you can about how much house you can afford, and go with the highest amount.  You’ll get a much nicer house that way.  If someone in your family has a calculator or spreadsheet or other budgeting tool and suggests a lower amount, you should argue with her until you get the most house that that nice lender said you could.  In fact, you should probably be looking at homes that cost more than that, because you can always talk the seller down.   And maybe you’ll see something you like even better that way.
4. Always remember:  your lender can refinance you later.
   Remember, the market’s going up! Up!  Up!  Sure, it’s going down now, but it’s going up in a few minutes.  (I think I heard it’ll be fine by Wednesday.)  The reason you don’t need to figure out a conservative loan that you can live with is that the market’s going up, and if you refinance later you can buy more house now!  Wasn’t it nice of that nice lender to tell you that you could refinance later?  He must really be trying to help you by offering to do that extra loan for you.  That stupid lender who said you could afford less house was only going to do one loan, and didn’t even offer to refinance you later.  He must just be lazy.
5. Refinance early, refinance often.
   Now that you have a really killer house, do you really still want to be seen driving that old broken down car of yours?  You have this great big garage, and all you’ve got to show for it is a five year old import.  You have some equity now.  Don’t you deserve a Hummer?  Besides, your equity’s not doing you any good unless you put it to use.  You’ve already by now picked out a hard working lender who generously doesn’t mind refinancing you, so go for the gusto!  You only live once.
6. Remember, the market will go UP!
   And of course, it’ll go up just in time!  So you don’t need a conservative loan.  In fact, come to think of it, hopefully you bought when the market was going up.  You don’t want to buy when prices are low, because good heavens, they may get lower (and what would your friends say to that).  Plus, if the market’s going down, the best way to pay for your house is with some kind of boring loan, and you won’t be able to refinance or get yourself a Hummer.  If you learn how to get foreclosed on, you can buy high when homes are popular, and then you won’t have to sell low, because the nice people at the bank will sell it for you.
7. If you can afford the lowest payment, you can afford the house.
   One of the great financial instruments of the twentieth century was the Option Arm, or “Pick-a-Pay” loan.  You may have heard that they’re appropriate for the self employed too, or for people whose cash flow varies.  But you’re not going to believe that either, are you?  (See “State Your Income”).  With a pick-a-pay loan, you get to pay either a lot of money on the loan, or just a little bit of money on the loan.  You’re not going to be a chump and pick the fully amortized 15 or 30-year fixed payment, are you?  That payment will be huge!  You won’t be able to buy as much house that way!  You might have to settle for a lousy older home or condo or rent for a few more years while you save.  Through the miracle of Negative Amortization, you can own the big brand new mansion you really want now!
8. Never mind what negative amortization means.
   You don’t need to know what negative amortization means.  “Negative” and “mort” — anything that sounds THAT depressing isn’t something an upbeat mansion-owner like you should spend time on.  You shouldn’t worry about it anyway, because the amount of negative amortization on the loan is limited, and you’ll still have the loan when you hit the limit.  I want you all to stop worrying about negative amortization right now, and never, ever, ever, look it up.  Also while you’re not looking things up, don’t look up what happens when you hit the limit.
9. The best thing to do with a document you don’t understand is sign it.
   The quicker you sign, the quicker you’ll get the keys to your new house!  Do you want to move in and throw a party for your friends, or do you want to waste your life reading and asking philosophical questions?
10. While we’re on the subject of reading…
    There are books on Amazon.com and lots of great consumer web sites that talk about loan programs, managing money, etc., but hopefully by now you’ve learned enough about ruining your credit to avoid all that highbrow academic stuff and get down to the real fun of shopping for the absolute most house you can afford, with a big garage for your new SUV!  Besides, reading makes you sleepy.

(This shouldn’t be necessary, but here it is:  You should be afraid of the FBI, and loan fraud is a serious crime.  This article is meant to be humorous and tongue in cheek only, and instructive only in a reverse-psychology sort of way).