News from the Tennessee Valley Columnists
MONDAY, JUNE 11, 2007

Dave Ramsey

Renter wants to buy home from his bankrupt landlord

Dear Dave: Iíve been renting a house for a while, and our lease isnít up until the end of the year. The other day I got a notice from the bankruptcy trustee saying that our landlord has filed Chapter 7. According to the trustee, he plans on surrendering the house. Is there any chance we could talk to the first mortgage holder and buy the house for the value of the mortgage? — Glen

Dear Glen: Iím afraid the only way youíll be able to buy this house is through the foreclosure process.

It sounds like the trustee has looked at the property and decided it doesnít have a lot of equity. Otherwise, he would sell it and take that equity to pay the creditors. The trustee then abandoned the property back to your landlord, and he didnít want to reaffirm. At this point, the property is no longer protected by the bankruptcy and this allows the lender to begin the foreclosure process.

Now, the lender has a lien against the property until the foreclosure sale occurs. They donít own it. You can, however, try to buy it from the landlord at this point. He still owns the place, even though heís surrendered it. Youíd have to get a new mortgage to make this happen, and that would be tough right now.

The bottom line, Glen, is that this is a doable deal but itís kind of complicated. Make sure you get a good real estate attorney to walk you through it all. — Dave

Invest lump sum?

Dear Dave: Whatís the best way to go when investing a one-time lump sum of $1,000 to $3,000 for a long period of time? — Josh

Dear Josh: First, letís define a ďlong period of time.Ē When it comes to investing, I consider this to be five years or more.

Iíd suggest either a growth and income or a growth stock mutual fund. Make sure the one you choose has a good track record of at least five years. Personally, I prefer mutual funds with a solid 10- to 20-year track record.

Sometimes people like to play one-time investments of this size on single stocks, but thatís not a good idea. Over long periods of time single stock investments donít consistently generate the kind of returns that a good mutual fund will. — Dave


Dear Dave: Weíve got three kids and are debt-free except for our mortgage. Last month we started living on a budget. Our house payment is $1,200, and my husband and I together make about $47,000 a year. We like our house and the neighborhood, but would it be wise to move down in house — and save about $500 a month on our mortgage payment? — Dawn

Dear Dawn: If saving money is the only reason youíre thinking about moving, then Iíd say donít do it. Selling your home, uprooting your family and changing schools are very draining — financially and emotionally. Now, if you made $3,000 a month and had a $2,000 house payment Iíd tell you to get out. Right now things are a little tight, but very doable.

It may take a few months of really working the budget to get all the kinks out and see what you can afford and what you need to sacrifice to give yourselves a little more breathing room. Then, after about a year youíll have gotten really good at it and have an accurate idea of whether you need to move.

Just take your time for now, Dawn. Doing a budget is a money stretcher, and managed money has a way of growing. Youíll probably feel like youíve gotten a raise after youíve been doing it for a while! — Dave

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