DEAR BOB: We recently refinanced our home for the third time in the last few years. Every time we received a significant refinance benefit, such as increased mortgage amount, lower interest rate, and a shift from adjustable to fixed interest rate. But each time, my wife and I said we would never go back to that mortgage lender again. Did we just have bad experiences or is this typical for homeowners who refinance? – Jonathan R.
DEAR JONATHAN: You are not alone. When I first read your e-mail, I figured you just had very bad luck.
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But the next day, I read a customer satisfaction survey from J.D. Powers Co., the nationwide survey company that quality-rates automobiles and many other consumer products.
J.D. Powers reports that most mortgage borrowers would not recommend their mortgage lender to their friends.
Based on my experiences with many mortgage lenders during my 37 years of investing, I rarely went back to the same lender. To illustrate, my latest experience with Wells Fargo Mortgage was unsatisfactory and I would never recommend that lender.
Most mortgage lenders look at loan volume and immediate profits. They don’t care about long-term relationships and repeat business with borrowers.
Only once did I have a current lender contact me about refinancing to improve my mortgage. It turned out to be a “bait and switch” tactic, which resulted in a bad experience.
HOW CAN CONDO OWNER GET OUT OF A BAD DEAL?
DEAR BOB: I made a bad mistake buying a studio condominium. Now I realize there is little demand in my community from buyers who want to purchase a studio condo. The reasons I want to sell are (1) noise from the upstairs and downstairs neighbors, and (2) I need more space. I have listed my studio condo for sale with two different Realtors on 90-day listings each. Neither brought me any offers. How can I get out of my bad deal for which I stupidly paid a $40,000 cash down payment? – Brad W.
DEAR BRAD: Except in major cities where space is at a premium, there should be a law prohibiting small studio condominiums, especially in poorly soundproofed buildings like yours. Even one-bedroom condos can be difficult to resell in many markets.
The fact you have $40,000 cash tied up in your condo is disconcerting. I presume you need that money to buy a nicer condo or house.
Most communities have condo specialist realty agents who sell the most condos. Find out who those specialists are in your area and seek their advice. One way or another, you can sell your studio condo, but you might have to offer especially attractive terms.
NO LIMIT TO FREQUENCY OF TAX-DEFERRED EXCHANGES
DEAR BOB: How many times each year can I “roll over” my capital gains with a tax-deferred Internal Revenue Code 1031 exchange? I am a real estate investor who “flips” several properties each year by purchasing at bargain prices, fixing up, and then profitably reselling without renting the property – Annette H.
DEAR ANNETTE: Internal Revenue Code 1031 contains no limit on the frequency of tax-deferred exchanges. Of course, all the properties must be held for investment or for use in a trade or business.
The big danger I see in your frequent “flips” is the IRS might argue, upon audit, you are a real estate dealer rather than an investor. If you are classified as a dealer, then your profits are taxable as ordinary income. For more details, please consult your tax adviser.
The new Robert Bruss special report, “Everything Homeowners Need to Know About the $250,000 and $500,000 Home Sale Tax Exemption,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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