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Picking Up the Payments

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Posted On: 07/29/2009

Q: I've heard that some builders and brokers will now make mortgage payments if I lose my job. How do such programs work?

A: So-called unemployment insurance plans have been around for years. I wrote about them in the 1992 edition of “The Common-Sense Mortgage,” but they have gained new attention as job losses nationwide have soared.

In basic terms, the idea is that a builder, broker or seller has an insurance policy that makes the mortgage payments in the event a homebuyer loses his or her job. Julianne Verrier, with Long & Foster, the country's largest privately owned real estate brokerage, explains that her company’s program allows borrowers to receive up to $1,800 a month for six months, or a total of $10,800. Coverage starts 60 days after purchase and continues for the next 22 months of the loan term. The program is open to all types of buyers and costs the seller $550.

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In looking at these programs, buyers should ask a number of questions:

• When does coverage begin? Usually there's a period of one or two months before payments start.

• How long do the payments continue? Typical terms range from six to 12 months.

• How much will you get? Policy coverage varies. You need to ask how much you will get per month and what's the maximum total payout.

• Can I get coverage if I'm self-employed? No.

• How are payments calculated? There's a difference between policies that cover the “mortgage,” meaning principal and interest, and policies where payments are based on interest, principal, taxes and insurance. Always get a written estimate of coverage.

Who gets the check? Does the money go directly to you or to the mortgage company?

If someone other than you is paying for unemployment protection, that's great. Alternatively, if unemployment insurance is a serious consideration then you have to wonder if it's wise to take on a new house and a new mortgage. If job security is iffy, then maybe buying a home will need to be delayed.

Q: I’d like to know how I can get my broker motivated enough to sell my house. My property is considered country property (agriculture) because I live five miles outside the city limits. I need the city broker to show my property, and for the life of me I can’t figure out why they aren’t. It’s already priced right, but the only comps I can find that come anywhere close to my house are from a distant state. It’s been staged, painted, updated and has great curb appeal, but my broker keeps losing the sale.

A: There are surely local comps for your property. Your broker likely provided some when the property was listed and you can certainly request the latest sale figures for comps in your area.

When I hear about a broker who “keeps losing the sale” my first thought is that to lose a sale a broker must first be showing the property and to “keep losing the sale” the broker must be showing it multiple times. That sounds like a broker who is doing his or her job.

Brokers cannot force prospects to buy nor can they coerce lenders to lend. While you believe the property is in good condition and well-priced, the reality is that sales in many local markets have fallen for reasons that have nothing to do with a property. This must be frustrating, but it's not fair to blame your broker for general economic problems that originated far from your home.

The buyers who are showing up to see your property did not get there by accident. The fact that purchasers are showing up at all says your broker is working and that the marketing plan is producing results. Like you, the broker wants to close the deal -- otherwise the broker isn't paid. That's surely a lot of incentive.

In some areas the market has rapidly changed. See what needs to be tweaked. Maybe you need to change the terms of your deal. For instance, instead of lowering the price perhaps provide a credit in the form of a “seller contribution” to help at closing.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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