Is It Safe to Retire During the Pandemic?

The fallout from the coronavirus COVID-19 has impacted many New Jersey resident’s retirement plans. A volatile stock market and widespread unemployment have derailed long established retirement plans. Soon-to-be retirees are watching their retirement savings disappear in the blink of an eye. It is difficult to say how long this will last, but here are a few things to keep in mind if you are planning to retire in the near future.

The country is heading toward a recession and it can be risky to retire during an economic downturn. When stock prices fall, it can be a great time to invest because you can buy low and sell high after the stock market rebounds. But if you are selling your stocks, a down market can be disastrous for your lifelong investments. You likely bought your stocks in a healthier market, meaning you bought them for more than they are currently worth.

If you’ve been watching your retirement savings dwindle over the last few months, try to remain calm. You cannot, technically speaking, lose money on your investment in the stock market until you go to sell your stocks. Even if your investments have shrunk significantly, you can still get this money back by keeping your funds invested until the stock market recovers. Withdrawing your money now will solidify your losses.

So, if your retirement plan is based largely around stock market investments, it’s probably a good idea to hold off retiring for a year or two until the stock market has time to rebound. While we cannot predict how long down market will last, if you can wait even a year or two, your investments might be worth more when you finally do decide to retire.

There are, however, some circumstances which would make it a good idea to retire in the face of a recession. If your retirement fund is mostly cash, you can probably afford to retire even during a recession. If your retirement portfolio is geared towards conservative investments like bonds instead of stocks, you may find that your savings are largely unaffected by the current economic climate. In these instances, as long as you budget well and live within your means, you may indeed be able to afford to retire right now.

Another way you might be able to consider retirement now is if you have other sources of income to keep up with your bills. If you have a pension or intend to collect on your Social Security benefits, you can depend more heavily on these sources of income in the beginning of your retirement while your investments recover.

Frustration is understandable—you’ve spent your whole life preparing for retirement only for events outside of your control to derail your plans. But unless you can afford to live off of other means of income, it will be worth it in the long run to hold off on retiring for a few more years. If you are worried about your retirement savings or how to protect your assets, Veitengruber Law can help. It is never too late to make some changes to reach your retirement goals.

What To Do When You’re Unemployed with Credit Card Debt

Many across the US have experienced job loss or income reduction as a result of the coronavirus crisis. Figuring out how to pay for basic needs and monthly utilities is one thing, but deciding how to handle credit card debt is another thing entirely. Any amount of credit card debt is concerning, but if you are working with a high interest rate, things could go sideways quickly. Here are 4 tips to getting through unemployment with credit card debt.

 

1. Budget to Prioritize Bills and Debt Payments

 

There are some obvious things you have to pay from month to month: mortgage or rent, utilities, groceries, student loan payments, and car loan payments. Look to see where you can cut back in your budget. Unlimited data or international calling can be cut from your wireless plan. If you are locked into a contract, see if you qualify for a hardship plan with your carrier. The same goes for TV. Get rid of cable and stream videos online or drop premium channels. If you pay for services or subscriptions, suspend your account for the time being. All of these small changes will free up some of your budget to go towards the payments that matter—like your credit cards.

 

2. Only Use Your Credit Cards in Emergencies

 

While you are unemployed, you should only use your credit cards if it is absolutely necessary. You may think you can rack up some debt now and catch up on payments later, but the problem is you don’t know how long you will be unemployed. If you continue to carry a balance from month to month, the interest can add up quickly. Out of control credit card debt can tank your credit score. It is best not to use your credit card at all if possible.

 

3. Talk to Your Creditors

 

Keep in mind that credit card companies want to work things out just as much as you do. They want to get a return on their investment, after all. Their options to get these payments are limited. They cannot take your house or car away, put a lien on your unemployment check, or garnish your wages if you do not make the minimum payment. The best way for them to get payment is to work with you. Explain your situation and come up with a plan for how to catch-up on payments.

 

4. Bankruptcy May Be a Valid Option

 

If your unemployment spans long-term and you find you are unable to pay your credit card bills, bankruptcy could be an option for you. In most cases, Chapter 7 bankruptcy will allow you to completely get rid of credit card debt. Filing for bankruptcy is a big decision, but it can also give you a blank slate to start over on better financial footing.

 

If you are struggling under the weight of heavy credit card debt, you have options. Veitengruber Law is an experienced debt negotiation firm. We can personalize a solution to handle your debt issues based on your specific circumstances. Bankruptcy isn’t always the best option, but if it is for you, we will be there every step of the way.

The Biggest Mistake You Can Make While Saving to Buy a Home

When you are in the market to buy a home, the more savings you have, the better. Between closing costs, your down payment, and other home buying expenses, the out of pocket cost of buying a house can add up. It can be tempting to use your hard earned savings, a retirement fund, or even your emergency funds in order to have sufficient funds for a down payment. But cleaning out your savings to buy a home is a very bad idea—and here are three reasons why.

1. Unexpected Expenses

After you buy a home, you will need a strong emergency fund more than ever before. Your emergency fund should include at least three months of expenses saved in the event you lose employment. For a homeowner, that’s at least three months of mortgage payments, homeowner’s insurance, home maintenance, utilities, and all the little expenses that add up when you own a house. If you use your emergency savings to buy the house, you may not be able to absorb the costs of any unexpected repairs that pop up down the road. Tapping into your emergency fund to pay for your down payment or closing costs could leave you high and dry.

2. Continuing to Save, Even After Becoming a Homeowner

If you have to clean out your savings accounts in order to purchase a home, chances are you can’t actually afford the home in the first place. As soon as you sign your name on the closing paperwork, you’ll be responsible for a whole heft of new expenses, including your monthly mortgage payment, homeowners insurance, property taxes, indoor home maintenance expenses, exterior maintenance (ranging from lawn care to snow removal and SO MUCH in between), and utilities. Will you still be able to contribute to your savings account on top of these new expenses? While you may be able to afford the out of pocket expenses to buy a home on paper, if buying the home means you cannot afford to keep saving in the future, it isn’t a good financial choice. You are better off waiting to buy a home until you are in a position to purchase a home without touching your emergency savings AND keep saving.

3. Becoming “House Poor”

If you’re like most Americans, your savings fund isn’t just for emergencies—it’s also where you build up enough money for vacations, to travel to visit family, or to refresh your spring wardrobe. A house might seem worth the sacrifice now, but know that the excitement of a new home will wear off just like everything else. You don’t want to be scraping by to survive and lose the ability to enjoy other aspects of your life. Roughing it out in an affordable rental for a few more years while you save more money can allow you to continue living your preferred lifestyle while still working towards the eventual goal of homeownership.

Buying a home is exciting and it can be tempting to go for broke to finally have your own place. We recommend that you keep building your savings until you are truly ready to purchase a home. Not sure if you’re ready? Reach out to Veitengruber Law and we can tell you straight up if you should go for it now, or if you’re truly better off waiting.

New Jersey Real Estate Negotiating Mistakes

Every buyer hopes their initial offer on a home will garner an immediate “yes” from the seller. While this does occasionally happen, the reality is an initial offer is just the first step in a sometimes long (and sometimes nail-biting) process between buyer and seller. If you want a leg up in the negotiating process, here are some common mistakes to avoid.

1. Showing Your Hand Too Soon

When you are negotiating the sales price of a home, you’ll want to have a pre-approval letter showing sellers that you have financial credibility and can afford the houses you are looking to buy. But be sure that you do not provide sellers or their agents with a pre-approval letter that lists a price for more than the list price of the home you are looking at. If your current pre-approval lists a higher price, ask your lender to adjust the letter to match the amount you intend to offer on the home.

2. Making an Offer That is Too Low

You might be in the market for a deal, but coming in too low has the potential to offend a seller and cause them to reject your offer outright. A good first offer might not always receive an immediate yes, but it should at least open the door for negotiation. Your agent will be able to show you a comparative market analysis to help inform your offer. If you really want the house, it is advisable not to make an offer less than 10% below asking price.

3. Insulting the Home

A seller often has an emotional attachment to the property that’s up for sale. This may be the place they raised a family, their first home with their spouse, or even a childhood home. So if you think you can insult the property in order to justify a lowball offer, think again. Most sellers don’t want to hear about how the aesthetics of the property aren’t to your taste. If there are some legitimate concerns with a property, be sure to balance these points with things you love about the property. If the seller knows you see the value of their property, they will be more willing to negotiate.

4. Getting Stuck on the Sales Price

Many buyers tend to focus on the list price to save some money, but there are many other different ways to get a great real estate deal. If a seller isn’t willing to budge on sales price, see if they will pay for all or part of your closing costs, speed up closing, or agree to a rent-back agreement that will allow them to stay in the house past closing if they haven’t yet found a new home. All of these things can be attractive to a seller and could push them to accept your offer.

5. Ignoring How Long the Home Has Been Listed

If a house has been on the market for less than a month, you should make a competitive initial offer to open the door for negotiations. If the home has been on the market for over 90 days, you have a little bit more power in presenting a lower offer.

An experienced real estate agent will know the market and be able to lead you in the negotiating process. Once you are through the negotiating process, Veitengruber Law will be there to look over your contract and make sure the terms you have negotiated are legally presented.

NJ Real Estate: How to Make a Successful Lowball Offer

When it comes to purchasing a home, buyers always want to know: How low is too low for an initial offer? Money conscious buyers are looking to save, but they also don’t want to risk offending a seller with an offer than is too low. So how much below asking price can you really offer? Here are some examples of when it would be acceptable to put in a low ball offer.

Offering even 1% to 4% below asking price can save you thousands of dollars depending on the price of the home. While this might not seem like a lot in the grand scheme of things, it could impact your mortgage payment by a couple of hundred dollars every month. Offering below list price in this range is a good idea if there are multiple offers on the table.

If you are thinking of offering 5% to 10% below asking price, you should have comparable sales as negotiation tools to justify your lowball offer. If other homes in the area have additional features but are priced the same or lower, that’s a great argument for offering less. You could also offer 5% to 10% less if the house has been on the market for several weeks without much interest or if it is a buyer’s market.

When you ask for 11% to 19% off the price of a home, you could save tens of thousands of dollars. This offer is reasonable when some aesthetic updates need to be made, but the house is otherwise in good shape. If the house is straight out of the 70s or needs new flooring in a few rooms, this is a great negotiation tool. If you know the seller is desperate to sell due to financial or personal circumstances, you could throw out an offer in this range and see what happens.

An offer that is 20% or more below the asking price, must be justifiable with some good, solid reasons. A multitude of factors will go into negotiating this offer. A strong buyer’s market and a house that has been on the market for six months or more are good indications a seller will accept a significantly lower offer. If the home is in bad shape and needs extensive repairs, you have a lot of room for negotiating a listing price down. Significant repairs would include a roof that needs to be replaced, foundation issues, or if the electrical, plumbing, or heating systems are not up to code.

A skilled NJ real estate agent will be able to guide you as you determine what is a reasonable offer below asking price. It is possible to get the home of your dreams while still getting the best deal possible.

As always, if you need guidance in this area, Veitengruber Law can direct you to one of the many NJ realtors within our professional network. Once you have made an offer, we will review all paperwork and contracts to ensure that you truly are getting the best deal possible!

Top 5 Factors That Impact NJ Real Estate Prices

Currently, the median home value in New Jersey is $342,527. If you are selling or buying a home, it is important to understand what factors go into determining a home’s value and how these factors impact list price. Here are some tips that can help you ascertain the value of your home.

1. The Big Three: Location, Product, and Timing

How well a home has been maintained and where it is located impacts the value of the home as a product. The right home in the right neighborhood can go a long way to drive up home value. Timing is harder to control. If you are selling, you want to list when the market is in your favor—but the market can change quickly.

2. Structural Integrity

Appraisers will perform a detailed physical inspection of the entire house – floor to ceiling and wall to wall. An appraisal inspection is meant to note not just superficial imperfections but also serious structural issues.

How well the home was originally constructed (and updated, if applicable), as well as the quality of the materials used, will impact an appraiser’s assessment of a home’s value. Even small details are given consideration. They will compare these details to homes in the area and adjust pricing according to specific similarities and differences.

3. Market-Driven Features

Every localized real estate market is going to have specific home features that impact the value of a home. Marble counter tops were a luxury ten years ago—they are the norm now. Consumer preferences drive expectations of required home features. If sold homes in your area boast open floor plans, gray scale interior colors, and hardwood flooring, this will set the bar for how your home will be valued.

4. Condition of the Home

Take care of any maintenance or small projects you have been avoiding. Fresh paint, manicured landscaping, and clean spaces will go a long way to showing off the full potential of your home. Make sure all the appliances you are selling with the house work and can pass inspection. You want to make sure your home looks like the most appealing home on the block.

5. Size and Appeal

Traditional layouts are big draws right now. Open floor plans and neutral color schemes are too. In matters of real estate, at least, size matters. Price per square foot is a popular search filter used by a multitude of potential buyers.

If you are a buyer, you can keep all of these factors in mind as you look for your future home. When you are trying to figure out how much you are willing to spend on a specific home, be realistic. It is common for buyers (and sellers) to think with their stomach and not with their head when it comes to estimating the value of a home. Remember that if a home appraises for under the contracted sale price, the sale could fall through. No matter how much value you personally put on a home, that value has to be backed up by the market.

If you’re ready to make a move, Veitengruber Law is ready to help you achieve your next real estate goal.

Why Does My Escrow Payment Keep Going Up?

If you have a fixed-rate mortgage, you might be surprised to find that your monthly payment has increased on your most recent bill. If you’ve noticed an increase in your bill, chances are you should look to your escrow payment. Your escrow payment may increase from time to time, but if you notice a steady increase, it is important to understand why.

In relation to real estate, an escrow account is a portion of a homeowner’s monthly mortgage payment that is deposited into an account meant to cover mortgage-related expenses like insurance and property taxes. Your escrow account is set up at the time you take out your mortgage loan. There are some instances where a homeowner can potentially opt out of an escrow account—like if you put more than 20% down. But in most instances, a lender will insist on the inclusion of an escrow account to ensure that essential payments are made. If you do not have an escrow account, you will be required to make sure you are paying for the payments typically covered by an escrow account.

When you get a mortgage loan, your lender will set up an escrow account for you. Your monthly escrow payment will be based on an amount that will cover your homeowners insurance, property taxes, and any required reserves. Once your lender determines the cost of expenses to be covered by your escrow account, they have 45 days to provide you with a statement outlining what the payment will be and when they are due. There are limits to how much money your lender can require you to pay in escrow.

Your lender recalculates your escrow payment yearly. There are three reasons your escrow payment may increase: 1) your homeowners insurance premium has increased, 2) your property taxes have increased, and 3) your servicer previously miscalculated your fees. If your lender determines your monthly payment needs to change, it will be explained in your yearly escrow analysis.

It is also possible that you could have an escrow shortage.  This is when the money in your escrow account is insufficient to cover the cost of your mortgage-related expenses. When your escrow account is short, your mortgage provider will give you notice along with an explanation. Even if the shortage is not your fault—for instance, your property taxes increase—it is still your responsibility as a homeowner to make the payment. To cover the cost of the shortage you can either pay the amount in full or make higher monthly payments.

Your escrow account protects your lender in the event that you cannot pay expenses related to your mortgage, but it can also protect you as a homeowner. There are plenty of consequences and penalties you can face if you are unable to pay your property taxes or homeowners insurance. Monthly escrow payments allow you to spread these expenses out, making it easier to budget and preventing you from falling behind on payments.

While your mortgage payment and interest may remain the same, your escrow payment can vary from year to year. Don’t let this increase take you by surprise. Prepare for these changes by paying attention to communications from your mortgage lender and staying on top of your property taxes and homeowners insurance.

Budget Friendly Activities to Do While Quarantined

It’s been weeks since schools and non-essential workplaces started shutting down and many of us are starting to get stir crazy sitting at home all day, every day. Social distancing is important—but how can you entertain yourself and your family in the meantime? Here are some great ideas to pass the time without spending a lot of money.

1. Virtual Hangouts

Just because you can’t see your friends and family IRL* doesn’t mean you can’t still hang out. Free video chatting apps like House Party and Zoom are becoming increasingly popular for friends trying to stay connected. Have a birthday coming up? Your friends can still watch you blow out your candles and sing happy birthday. Set up a party on House Party and play some of their virtual card and trivia games to celebrate. Getting regular “face time” with people outside of your house is important and in the digital age it is easier than ever before!

2. Fun in the Kitchen

Always wanted to cook more but never had the time? Now is the perfect opportunity to get creative in the kitchen. With no commute to deal with, you’ll have more time to spend cooking yourself a scrumptious dinner. Learn how to bake bread, make a fun dessert with your kids, or try some new techniques. You can even host a virtual dinner party by getting your friends to cook the same meal as you and dig in digitally over a video chat.

3. Online Performances

With many artists and performers forced to cancel shows and even entire tours, some have taken to the internet to provide their fans with some entertainment. Artists like Billie Eilish, Billie Joe Armstrong of Green Day, BTS, Dua Lipa, and more have streamed free online performances. If you miss the club, DJs have been creating virtual raves and nightclub experiences. You might not get the full effect from your living room, but you can still get your groove on.

4. Free Binge Watching

Some streaming services are offering special social distancing offers. HBO has made some of its most popular shows, movies, and documentaries free during this trying time. Additionally, Broadway HD is a streaming service that allows members to watch hundreds of award winning Broadway shows. Right now, you can get a commitment free, 7-day free trial that gives you access to stage hits without having to travel to NYC. Keep an eye out for other free trials and content.

5. Get Outside!

As long as you can do it responsibly and keep your distance, going for walks and runs is a great way to stay in shape and pass the time while getting some fresh air and soaking up some beneficial sunlight. Yard work, hiking, boating, and biking are other great ways to get your body moving while keeping your distance from other people.

It can be difficult to feel so cut off from the rest of the world right now, but it helps to remember we are all in this together. By keeping yourself active and entertained with these fun and budget friendly quarantine activities, you’ll make it through the pandemic in much better spirits.

 

*In Real Life

5 Important Things to do Before Buying a House

For most homeowners, buying a house is the purchase of a lifetime. Before you sign on for your dream home—and potentially all the debt that will come with it—you need to take an honest look at your finances. If you are thinking of buying a house, these tips will help you align your personal budget with your house goals.

1. Know Your Household Budget

Setting up your household budget should start with having a firm grasp on how much money you have coming in (after taxes) every month. Next, you’ll need to determine your monthly expenses, from bills, utilities, and insurance to groceries and entertainment. The amount of money remaining after you subtract your monthly expenses is your expendable income. Are there areas you can improve on? Is the expendable income you have enough to cover the added expenses of a mortgage, insurance, and home ownership? Make adjustments where necessary.

2. Pay Down Debt

Of course, it is possible to buy a house even if you currently have existing debt, but you are putting yourself in a much better position to be approved for a mortgage if you can pay off most or all of your debt first. Paying off debt will also improve your credit score, which is also an important factor in getting the best terms for your mortgage.

3. Save for a Down Payment

Lenders have been increasingly cautious about who they lend money to and how much money they lend. Because of this, lenders often require a 20% deposit on a home. Depending on the price of a home, this deposit can get pricey. Focus your personal budget on saving towards this deposit. It will improve your chances of getting approved for a loan and give you a head start in paying off your home.

4. Know How Much House You Can Afford

Feel out what kind of loan you can get pre-approved for. Typically, your actual “new home” budget will be less than the amount you are pre-approved for, but this is a good jumping off point. Next, seek out homes that could realistically fit into your budget. Most lenders suggest a house that is about 2.5 time your annual salary.

5. Research and Inspect

If you find a home you can afford that you want to buy, don’t jump to sign the first contract of sale laid before you. Take the time to hire a home inspector. A home inspector is different from an appraiser and you will have to hire them each separately. However, a home inspector could save you money in the long run by uncovering any big issues with a home before you own it. Take some time to research the real estate market you are buying into. Is this home priced fairly compared to similar homes in the area? If not, you could use this data to argue for a lower price.

Finding a home you will love with your budget is possible. By modifying your spending, you can save money, get the best mortgage possible, and land your dream home.

What To Do With Your PPP Loan

$349 billion have been dispersed to small businesses as forgivable loans through the Paycheck Protection Program. Now those businesses have to decide how to use the money. The borrowed funds are restricted to payroll costs, rent, mortgage interest, interest on other loans, and utilities. If you are trying to make sure you receive the maximum amount of loan forgiveness, there are a few things to keep in mind as you spend these funds. Here is what we can infer from the available guidance on PPP loans.

1. Set Up an Audit Trail

You will inevitably have to provide a record of how you spent your money when you apply for forgiveness. One of the best ways to do this is to deposit the funds into a separate business checking account to keep them separate from your other business funds. Only use this account to pay for expenses that qualify for forgiveness. Keep all your payroll records, invoices for health insurance, mortgage statements, a copy of your lease, any canceled checks, and evidence of rent/utilities payments in an electronic file.

2. Pay Attention to the Calendar

From the date the loan is funded and the money is deposited into your account, you have eight weeks to spend the money on forgivable expenses. Even money spent one day outside of the payout period will not be eligible for forgiveness.

3. Restrict Non-Payroll Expenses

No more than 25% of the loan can be used to pay for non-payroll related items. So while you can use the money towards rent, mortgage interest, and utilities, if those costs exceed 25% of the loan amount they will not be eligible for forgiveness.

4. Avoid Overpaying Wages

The maximum amount you can pay each employee and still have it forgiven is $15,385 during the payout period. This amounts to roughly eight weeks of payroll for an employee making $100,000 a year. Group health insurance premiums, retirement benefits, and state unemployment tax are not included in this cap.

5. Hire Back Employees

There are penalties for businesses who made workforce reductions after February 15^th. Unless those workforce reductions are restored by June 30^th, the amount of the loan that can be forgiven will be reduced. So, if you had to let people go before receiving the loan, it might be worth it to hire those people back before June 30^th to maximize the forgiveness you are eligible for.

6. Restore Pay Cuts

There is another penalty stipulation in the law that says if you have cut any individual employee’s pay by 25% of what they earned in the first quarter of 2020, that cut of pay must be restored by June 30^th or some of the loan will not qualify for forgiveness. This only applies to employees who did not earn more than $100,000 in 2019.

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If you follow the guidelines and keep a detailed and complete record of your expenses, you can maximize the forgiveness of your PPP loan. For businesses lucky enough to acquire this loan, it is a great opportunity to protect your business and your employees during the coronavirus crisis. Veitengruber Law is here to support small businesses as they navigate these new financial obstacles. If you need help deciphering the stimulus loan guidelines, reach out to us at any of the phone numbers listed on our website. We are all working daily, as a team, but from our respective homes. If you need our help, we are ready and able to give it!