Monday, May 22, 2006

FICO scores and your mortgage

In case you have not gotten aquainted with the term FICO, but you would like a mortgage some day...

"FICO score often times the only number that counts"
Kenneth R. Harney, Washington Post Writers GroupPublished May 21, 2006

Is it a FICO score or a Fake-O?

Mortgage brokers and lenders say it happens all the time: A mortgage applicant says, "Oh, I've already checked my credit score online." Then the loan officer pulls the home buyer's FICO score and finds that it's 50 or 100 points lower than the generic credit score the applicant quoted."This is becoming a real problem -- a lot of people simply don't know the difference between FICO scores and other scores," says Ginny Ferguson, immediate past chairman of the National Association of Mortgage Brokers' credit-scoring committee and co-owner of Heritage Valley Mortgage Inc. of Pleasanton, Calif. "They think it's all the same."

FICO scores, developed by Fair Isaac Corp., are the predominant credit measure used by the mortgage industry. The scores run from 300 to 850 and are used to predict a borrower's likelihood of future nonpayment, with higher scores indicative of better creditworthiness. Other commercial scoring models, which also may accurately predict risk of nonpayment and gauge a consumer's credit health and behavior, are widely available on the Internet. But they are rarely used by mortgage lenders and have limited relevance for a home mortgage application. Lenders use FICO scores to price mortgages. Lower FICO scores can cost applicants hundreds of dollars a month in higher interest payments and thousands of dollars over the term of the loan.When FICO scores are substantially lower than non-FICO scores, "the consumer assumes the broker did something to make their scores worse" -- perhaps seeking to charge them higher rates or fees, said Ferguson. "And of course, that is not the case."

Independent credit reporting agencies that supply FICO scores to mortgage lenders also are feeling the heat."Our members get blamed by their own customers, who are primarily brokers and lenders," says Terry Clemans, executive director of the National Credit Reporting Association, a trade group that represents hundreds of credit agencies providing consumer reports and scores to mortgage lenders. "We're getting a lot of angry conversations about `why is your score lower' than what the consumer got somewhere else" online, Clemans said. But credit reporting agencies are middlemen -- buying reports and FICO scores from the three national credit bureaus, Equifax, Experian and TransUnion -- and repackaging them for mortgage lenders.

Ferguson, who lectures nationwide to loan officers on credit scoring, says she's seen only one instance when a mortgage applicant's FICO score was higher than an Internet pop-up site's score, "and that was just by two points." Typically, she says, a FICO score comes in 35 to 100 points below a generic score purchased from an Internet site -- and that's where the trouble starts because "we just don't use those other scores."Fair Isaac has become concerned about marketplace confusion over its proprietary scores and a multitude of other scores. Tom Quinn, vice president of global scoring for Fair Isaac, says the company's own research has documented disparities of 5 to more than 200 points between FICO scores and non-FICO scores on the same consumer. The disparities exist because the statistical scoring models often assign different weights to the same information and generate what may be strikingly different numerical conclusions.

Some of the most active Internet-driven score purveyors are associated with national credit bureaus. But they don't go out of their way to tell consumers that the credit score they are buying is an in-house generic score, not a FICO, and therefore it will have little relevance in a home mortgage transaction. For example, is owned by TransUnion. The Web site trumpets the importance of credit scores as financial management tools, but reveals only in tiny block print at the end of its "credit score sample report" page that "the credit score provided here is not a so-called FICO score."Steven Katz, a spokesman for TransUnion, said his company's TrueCredit score "is really intended to help consumers understand the importance of taking control" of their credit management.

It is, in other words, primarily an educational tool, not what will be used to qualify you or price your mortgage. Nonetheless, prominent on the site is the statement that the TransUnion score is "how you may be viewed from a lender's perspective."Except, of course, if that lender happens to be taking your application for a mortgage and pulling only your FICOs.

Saturday, May 20, 2006

First-time Buyers: Is Now the Time to Buy?

Nice succinct story on first time buying in the current market from realty times. The examples are based on less money than it would take to buy here. However, many of my cliets pay $1200 to $1600 in rent every year, year after year and wonder if they should buy. Yikes.

Another real estate blogger (the Queen of real estate blogs for her awesome and endless linking)put buying in the following terms. MUST READ!

What's interesting is Fortune (magazine) looks at and see the housing market like the stock market! It ain't the same. For one, in stock the market when a company whose stocks you own goes down the tube.. you lose your shirt. The value of your stocks could go down to zero or worthless. (I can speak about that from my own experience). Not true in the housing market. People who bought a property four or five years ago, even in today's market conditions, their house worth way more than they paid it for, okay?! And with a property, the value of a property never goes down to zero!
In either case, many individual homeowners have nothing to worry about: They can simply stay put and ride out the cycle. The only thing they'll lose is the opportunity to brag about their paper profits. And in some places, appreciation has been so sharp that a seller could see prices plunge 30 percent and still make a hefty gain.
See that.. That means soon you'll see more buying opportunities on the horizon.

Amen to that

Wine tasting with my clients

Great time with my clients and associates at my last wine tasting. I thought it would be fun to hold it at a residence... Thanks Jordan and Denise!

Look for the next one in late summer... love to have the outdoor patio parties!

New digs Scandanavian

Serenity... I was going crazy walking in to my living room the past year. My wife and I held up on decorating forever... Too busy I guess. The furniture was way wrong for the new place. Just didn't work. Plus, I agonize over the decisons. I'm a minimalist, and have to maximize the pieces I choose. Finally though... I can walk into my living room and actually NOT flinch, whine and complain about the furniture. Now, on to more anxiety... choosing my personal photographs to enlarge and mount as our sole artwork in the house.

Friday, May 19, 2006

Boomers Turn to Real Estate

I'm not exactly a Baby Boomer, but I do look to my elders for examples. This story below cites a study suggesting Boomers overwhelmingly believe in real estate as an investment of choice. It also makes us think about smart retirement planning.

In fact, my wife and I were disussing tax planning the other day. I want to sock as much away in her pre tax 403B and after tax IRAs for me. Not surprisingly, she doesn't want to bury all our cash until we are almost dead... then give it to the kids! Hmmmm... a good investment that has tax advantages and is liquid... maybe real estate?

Boomers Buy Real Estate to Ease Financial Concerns(May 19, 2006) --

Many baby boomers feel financially strapped and worry about how they'll be able to retire, so they turn to real estate as a means of accumulating wealth, a study shows. According to Baby Boomers and Real Estate: Today and Tomorrow, a study conducted for the NATIONAL ASSOCIATION OF REALTORS® by Harris Interactive, boomers overwhelmingly channel their concerns over finances into real estate.

Almost eight out of 10 own their home and one-quarter own one or more other kinds of real estate in addition to their primary residence. The most popular real estate investment is land (13 percent), followed by rental property (8 percent), vacation or seasonally occupied home (7 percent), and commercial real estate (2 percent). “Boomers have turned owning multiple homes into a fine art,” Peter Francese, a demographic trend analyst, told attendees at the 2006 REALTORS® Midyear Legislative Meetings & Trade Expo Thursday.

The survey found 96 percent of boomers think real estate is a good investment. As a group, boomers are wealthy compared with the rest of the country, earning median household income of $64,700 compared with $44,400 for the general U.S. population. But that relative wealth isn’t translating into peace of mind. Thirty-seven percent of the boomers say they’re making just enough to make ends meet and 17 percent say they’re having financial difficulties. Only 4 percent say they’re financially well off. The survey also found three out of four boomers believe they’re not financially prepared for retirement. “This survey uncovered a lot of anxiety,” said Francese.

To gather the data, Harris Interactive conducted an online survey in early April of 1,969 U.S. adults born between 1946 and 1964. For more highlights of the Baby Boomers and Real Estate: Today and Tomorrow study, read the press release. The full study will be available in June.— By Chuck Paustian for REALTOR® Magazine Online

Thursday, May 18, 2006

Ravenswood Manor Garage Sale-May 21st

For all you Albany Parkers (The APs as my wife calls us), Lincoln Square, and Ravenswood Manor dwellers. Pick up that awesome bargain... I'll be on the look-out for an iron yard table and chairs for my buiding's yard. Hands off!

Neighborhood Garage Sale - May 21, 2006, 10am-4pm

Rain or shine, this is your chance to take advantage of an event that attracts hundreds of bargain hunters to the Manor. The RMIA takes care of the permits and the publicity. Sign-up by sending your name, address, phone and e-mail address to

Or, sign-up at the Winter Social on March 4th, or use the form in the newsletter and mail in your registration. The deadline for registration is May 11th, 2006. Then set out your wares in an attractive fashion on the 21st. It’s that simple. Not interested in selling? Many Manor residents have picked up treasures of their own. So whether you’re selling or shopping, the garage sale is lots of fun for all. Monetary donations to offset the cost of advertising and promoting the sale are appreciated.

Good luck at this year’s Garage Sale!

Monday, May 15, 2006

The Buy Side... Finding a Place

I've spent some time as of late discussing buy side issues . It's kind of a general take on the service and consulting value of a Realtor. Self promotional yes, but its also a sounding board where I can refine what is important when representing a client. I look forward to changing the format of the blog to be a little more true. Use it more as an actual web log of situations and solutions, stories and cool real estate links I come across and comment on.

The following is sort of a conversation I may have with clients new or newer to buying a place.

The Buy Side:

ONCE YOU FIND A PLACE. You love the place. It has a great location, top floor, huge deck, parking and close to the “L”. What now? You buy it, that’s what. I’m pushy, I know… but you have been thinking of buying a place for what…? One, two, three years now? You love Chicago and this is the next step up in life.

Once you find a place it’s time to negotiate the transaction. There is nothing set in stone… no price too high or too low. No terms too outrageous. Although there are written laws to protect consumers, you can still run into unscrupulous characters and make costly mistakes. How do you feel good about your purchase?

It’s really a rush identifying a great property and seizing the opportunity to purchase it. But the negotiation and transaction process is the meaty part. Determining a fair market price is the first step. Preparing a professional offer and securing the many terms of a contract comes next. Scheduling inspections, consulting during attorney review, and keeping the transaction on task round things out.

Every transaction is different. The buyers and sellers react in various ways to conditions of an offer. The key is to know what is reasonable and what is not, find the middle ground, and do it in a way where everyone wins. Unfortunately, unskilled negotiators can blow up a deal. A sensible owner or buyer can be too emotionally attached to the deal and act irrationally.

How will you avoid these pitfalls?

Friday, May 12, 2006

Lists that make us go Hmmmmm..... Top 10 Places to Live

Show of hands... how many would really pick 6 or 7 of the following places to live over Chicago? Pittsburgh, Kiplingers?...Pittsburgh?

(Source: Realtor Magazine)
Where Are the Top 10 Best Places to Live?(May 10, 2006) --

The best cities have affordable housing, low crime, high-quality health care, and lots of cultural amenities. Taking into account these and other factors, Kiplinger Personal Finance magazine created a list of the top cities in the U.S.Kiplinger teamed up with Bert Sperling, co-author of Cities Ranked & Rated (John Wiley & Sons Inc., 2004), to compile a database of potential home towns that meet their criteria for a great place to live.

These are their top 10:

1. Nashville, Tenn. The top pick offers affordable homes, a mild climate, and a phenomenal entertainment scene that goes far beyond country.

2. Minneapolis-St. Paul A great sports town that is hip, progressive, and sensible in the Midwestern sense.

3. Albuquerque, N.M. This laid-back city offers resort-town ambience, a boomtown economy, and cow-town prices.

4. Atlanta Vibrant, beautiful, and genteel.

5. Austin, Tex. A college town that offers a sophisticated salsa of culture, history, and politics.

6. Kansas City This city offers everything from world-class museums to mouth-watering barbecue.

7. Asheville, N.C. World-class cuisine, amazing crafts, live music venues and fine arts make this city tucked into the Blue Ridge mountain range one of a kind.

8. Ithaca, N.Y. An Ivy League outpost with great food, beautiful scenery, and liberal politics.

9. Pittsburgh Distinctive neighborhoods, tree-lined streets, glittering skyscrapers, upscale shops, and a diversified economy make this a great place to live

10. Iowa City, Iowa This wholesome middle-American city is bursting with creative and intellectual energy.

Thursday, May 11, 2006

What the heck do I do? Working with yours truly...

It has become evident to me that many first time buyers avoid working with a Realtor (at first) because they have no idea what to expect from one. I have also had recent clients—someone I have met at an Open House or a referral—that have generally started their search with me. These clients, however, are sometimes equally void of expectations of service and where my consultation comes in handy.

This is a real and fundamental problem. My business is based on the successful consultation of my clients’ real estate purchase or sale. It’s no different than a lawyer who concentrates in personal injury cases or a nurse who maintains care of cancer patients. We must trust these practitioners.

In other terms, think of how long it would take you to replace a leaky roof. The economy of scale and expertise needed make it a prohibited activity for most people. So, they turn to a roofer. While the roofer spends two days for an entire tear-off and replacement, you are off tending to your own career, enjoying leisure time, researching investments, or working on another project you are better equipped for. Try it yourself, and it could be a week or month of fully concentrated effort. A “do- it- your- self” mentality in this case of roof repairs is not cost effective.

It’s serious work that professionals engage in day after day, year after year. I reach out to open house visitors, Internet consumers, and visitors to our office to make this point. Real estate is serious work I engage in day after day, year after year. It just takes a little trust in the practitioner.

Because my focus is in residential real estate, I spend most of my time refining the home purchase process for my clients. So here are a few tips for working with a Realtor. I guarantee if one is open to the following concepts, the home search will offer an education and experience in ownership that is of great benefit.

I plan on refining a lot of the following…putting it in a logical order. But this is a blog however, so I wanted to get some of these observations out there.

The Buy Side:

THE SEARCH: I suppose the most recognizable Realtor service is locating a property that meets a clients needs. Considering there are over 53,654 properties currently in the Multiple Listing Service of Northern Illinois (our shared home listing system) there is a need to pare it down a bit.

It really pays to open up a dialogue about what you are looking for. When I meet people for the first time, I really want to know what they want and expect in a home purchase. Is it neighborhood or more space? Parking or public trans? Sounds basic, but it is surprising how many people end up loving a home that is really different from what they originally told me they wanted.

This is because of two reasons:

First, they truly did not know the local market. Many first time buyers simply have trouble getting their heads around real estate values in Chicago. I can usually help change the perspective of ownership in Chicago. Where some people have gotten discouraged and gave up on ownership because expectations are not met, I’ve helped clients understand the value of Chicago real estate and to adapt to what I call “real” city living.

Secondly, the public search technology for consumers can be deceiving. Although I totally embrace all the information available (it many times makes working with better educated clients easier) it takes years to learn neighborhoods, amenities, quality of life issues, and market value. This can not always be done in a relatively short home search. Consumers dive into the endless world of real estate search engines, products, evaluators, brochures, sales offices, virtual tours, etc… It will get overwhelming quite fast. For example, for each technical skill I learn for my PC and Blackberry, I could spend endless hours learning another and another. When does it stop?

A real estate search, at face value alone, can be a consuming and anxious process without a good consultant to work with. How do you know you have looked at enough? Is there some neighborhood I don’t know about? What the heck is available in my budget and how do I live in that? Maybe I can make better sense of it. Maybe I can help make it happen.

More tomorrow on the process… ONCE YOU FIND A PLACE

Mosquito tips and more... heading for the summer

The Chicago Tribune put together the following list on mosquitos and spring/ summer cleaning. There are a couple great links in the story for green living and every home owners pal... Bob Vila. Why this caught my eye, I don't know... I got sucked in however and now it's your turn.

10 ways to deter mosquitoes:
Tribune news and wire services Published May 5, 2006

Scientists predict that mosquitoes, particularly the species that spread the West Nile virus, will attack in record numbers this summer due to an unusually warm winter. This Old House polled the experts and shares some low-cost and simple solutions for a back yard:
1. To discourage insects from swarming, replace outdoor bulbs with yellow bug lights.
2. Eggs are laid in standing water--repair leaky outdoor faucets to avoid creating puddles.
3. Irrigate grass and garden beds early in the morning so excess water evaporates.
4. Change water in birdbaths at least twice a week.
5. Check boat covers and the plastic tarp slung over your firewood for collected rainwater.
6. Stock ponds with goldfish that feed on mosquito larvae.
7. Mow tall grasses and clear weedy patches where bugs linger.
8. Crush marigold leaves and petals and rub the extract on your skin for a mild repellent.
9. Toss rosemary or sage onto the burning coals on your grill to act as a repellent.
10. Mosquitoes love shade and loathe wind.

This Old House landscape contractor Roger Cook recommends keeping trees and shrubs well pruned for a sunny, breezy yard.
Spring-clean those forgotten corners When the sun comes out and dries your rain-soaked patio and garden, everything outside suddenly feels fresh and clean.
And everything inside probably doesn't. For tips on cleaning items around the house that you may not think about, we turned to Real Simple magazine's home director Michael Cannell, and to,
a Web site promoting eco-friendly living.

Lampshades: Supporting the shade from the inside with your hand, use a lint roller to whisk away dust.

Computer keyboards: Dip a cotton swab in isopropyl alcohol, and clean around the keys for all those times you snacked while surfing the Web.

Marks on walls: Rub away unwanted crayon or pencil marks with a damp sponge sprinkled with baking soda.

Sofa: Use the vacuum's brush attachment to get underneath cushions and behind the sofa. Flip the cushions to even wear and tear.

Blinds: Wipe slats with damp microfiber cloths.

Teak or wicker outdoor furniture: Use a soft scrub brush with a mild, oil-based soap such as Murphy Oil Soap to clean outdoor furniture, then hose it off.

Oven: Sprinkle salt on spills while the oven is still warm. If the spill is dry, wet it lightly, then add salt. Scrape away the spill when the oven is cool, and wash it clean.

Grease clogs: Pour a half-cup each of salt and baking soda down the clogged drain, then six cups of boiling water. Wait several hours before flushing with warm water.

Dishwasher: Run a cup of vinegar through your dishwasher once a month to remove soap buildup.

Install a solar attic fan. Hot, humid days make attic ventilation difficult but you can garner the power of the sun and use it to ventilate your attic with a solar attic fan mounted on the roof. This beat-the-heat fan is passive and runs entirely on free energy, so it's an investment that will pay off for years to come. When mounted at a high point on the roof, you get the most advantage of its power to circulate the air and ventilate attic space.There are several different designs of these fans for different roof profiles. For example, a low-profile design is unobtrusive and ideal for most pitched roof applications. For a house with a flat roof, a pitched raised vent is deigned to improve exposure to the sun. If you live in an area with heavy snowfall or have a tile roof, there's a high-profile design. The fans come with self-flashing kits designed to provide a leak-proof and seamless installation.

Bob Vila gets `On The Level'Real-estate and home-improvement guru Bob Vila has launched a blog --called "On the Level"--offering information on everything from new trends in home renovations to design tips on constructing homes that can withstand storms and hurricanes.The blog, reached via Vila's Web site at
also offers reviews of new home products and gadgets. Vila has a comprehensive list of "bulletin board" forums on the Web site, where do-it-yourselfers can seek help from other DIY types.The site also includes bulletin-board forums for specific questions on appliances, architecture, "basements & attics," "bugs & pests," "design & decor," lighting and modular homes. In the "Buy, Trade, or Sell" forum, one person recently posted a message saying he is looking for some 1950s metal kitchen cabinets. He got a reply from a seller who had some--in pink.

Thursday, May 04, 2006

Managing New Construction Transactions

New construction and recently converted condos pose certain problems that a re-sale unit may not. For instance, we (a real estate attorney) almost killed a deal for my clients when we felt there was a misrepresentation in the marketing. However, many new projects and conversion purchase contracts contain clauses suggesting the builder may make “changes” or “changes may occur”.

What is acceptable and what is not?

The key is to have an agent and attorney that explain the many facets of purchasing new and new conversion projects. Do-it-your-selfers may get stuck in a deal even though a builder makes “necessary” changes that are unarguable. We work to make sure our clients know when they can get out… and when they are in for the long hall.

Ultimately, the decision is up to the buyer. If the market suggests that the location, size, amenities, and rehab of the condo merit a certain price, then it is up to the buyer’s values if the place is right for him or her. But I’m able to foresee certain issues that may arise and clear them up before all documents are signed, all “Ts” are crossed and all “I”s are dotted! These issues are formerly added to contracts in the correct manner and in the allotted time period.

From a simple attorney review period to transaction negotiations that have major alterations, I’m communicating with all parties involved. The ability to suggest solutions can mitigate problems before a client even knows there was one. Wouldn’t you rather worry about your job and not the full time job of processing a home transaction?

I really enjoy the war stories surrounding home purchases. There is always stress involved. But the idea is to go into the battlefield with your eyes wide open and with a solid contract. I can help that happen and we do it every day.