Ways to Wealth


Elaine Zimmermann


David: I have heard there are unusual college scholarships that people never apply for. How does someone find out about these?

Elaine: There are many scholarships set up by organizations, individuals and fraternal clubs that go wanting for applicants each year.  Let me share with you a unique experiment I tried while writing this column that may help you and others locate many of them.

I decided to look around the room and note what I saw. I am writing this on a Gateway computer. So I searched “Gateway scholarship”. An entire program of scholarships appeared on the screen. They are not connected with the computer manufacturer, but all a compilation of scholarships for minority students. One such scholarship is the Ron Brown scholarship named for the first African-American appointed to the Cabinet post of Secretary of Commerce and the first to serve as Chairman of the Democratic National Committee. At the time of his death in 1996, he was a figure of global prominence, respected for his intelligence, political savvy and leadership. He died while on a trade mission in Eastern Europe. This scholarship awards $40,000 to deserving applicants; $10,000 per year for a four year period.

Someone sent me card with a turtle on it. I searched “turtle scholarship”. The Boyd Nathaniel Lyon scholarship appeared. It was set up by a family whose son was devoted to the study of sea turtles. He was lost at age 37 while swimming off the coast of Florida in pursuit of closer examination of the sea turtles he was passionate about protecting.

This is a somewhat extreme way to look for scholarships, but it illustrates how many unusual scholarship opportunities exist.

What I suggest is that anyone looking for a scholarship who has already exhausted the opportunity for Pell Grants or other financial aid from the college or school you wish to attend compile a family affiliation list--all of the associations of you and your parents. These should include your parents’ professional, spiritual and fraternal organizations.  Compile the same list for yourself but in place of your profession include future profession, as well as interests and hobbies (such as the sea turtle enthusiast), and memberships in clubs or organizations (Boy Scouts, fraternities, canoe enthusiast and others).

Begin by searching for scholarships within your father’s profession—“Navy pilot scholarships”. Or “Son, Navy pilot scholarship”. You may further define your search by adding “Vietnam veteran Navy pilot scholarship, son/daughter.”

If your father’s or mother’s profession includes a union membership, be sure and check for scholarships offered by that union. For example, the AFL-CIO’s Union Plus Scholarship Program is designed to assist students of working families who want to begin or complete their college educations. The program database includes in excess of $4 million in union-sponsored scholarships. Each contains the scholarship eligibility, application deadlines and contact information.

Go to unionplus.org to view the list of more than 38,000 local unions in the United States. It includes everything from the National Association of Letter Carriers to the Pilot’s Association. Most of these include information about the scholarships that are available to their members and members of their immediate families.

If your father Rotarian (member of a Rotary club) or some other fraternal organization such as the Elks, you may be eligible for a scholarship from these organizations.

The Elks have more one million members in more than 2,100 local lodges. Each year the Benevolent and Protective Order of the Elks awards more than $3 million in college scholarships. Go to their website elks.org to learn more.



Ways to Wealth




By: Elaine Zimmermann










Martha and Dudley: We have just found out that we are being transferred overseas for two years. Our car is leased. Is there anyway we can get out of the lease without hurting our credit?




Elaine: With gas prices on the rise again, there are probably many people with gas-guzzlers that would like to get out of their leases and replace them with more fuel-efficient vehicles. Although your situation is different, I am sure this is a question many people have.

Getting out of a lease early on a vehicle can be difficult and costly. But there are some solutions. This is a good time to pull out your lease contract and review it.

Here are some the items that are included in your lease contract that will let you know where you stand with your agreement. Many leases require you to complete all payments within the lease. If you pay the lease off “early”, some will also require you pay an “early termination fee”. This can range from $150-$350. Also, you can be charged a “wear and tear” charge if there is any mechanical damage to the car. And some leasing companies charge a monthly “garage fee” for the months remaining on the lease.

There is still more. Some leases say you are responsible for the difference between the “residual value” that was previously set forth in the contract and the actual “market value” for vehicle. This can be thousands of additional dollars.

To summarize, the lease can hold you responsible for the remaining payments, an early termination fee, wear and tear fees, garage fees and the difference between the residual value and market value of the car.

Not all leases have these additional fees, but you should check your lease carefully to where you stand. This shows you how important it is to negotiate a good lease contract on the front end.




What are your options?

You can attempt to sell the car. You must verify, in writing, what the final “pay-out” for the car is from the leasing company. Then you must sell the car for this amount or greater.

The difficult thing about this is that some lease final “pay-out” amounts are $2,000-$5,000 higher than you will be able to receive for the car. I know this is not a good option.

There is another relatively new option for getting out of an auto lease early that does not involve all of these financial penalties. It is “lease trading”.

You can go to www.leasetrader.com and list your vehicle for $40. The site will post the information about your vehicle, including the lease amount, remaining lease payments and a photo for the $40 fee. A similar service is available from www.swapalease.com.

Prospective buyers of your lease must register and have their credit approved before they are permitted to contact you. The site has a standard “lease transfer agreement” that has been approved by most leasing companies including GM, Audi and BMW. There may be a one-time lease transfer fee (usually the amount of one lease payment), but that will be the only fee you will pay. The “lease purchaser” is responsible for picking up the vehicle in your city and transporting to their location.

Although, not everyone finds a “lease purchaser”, it may be worth $40 to avoid the costly alternatives.







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Ways to Wealth




By: Elaine Zimmermann










Martha and Dudley: We have just found out that we are being transferred overseas for two years. Our car is leased. Is there anyway we can get out of the lease without hurting our credit?




Elaine: With gas prices on the rise again, there are probably many people with gas-guzzlers that would like to get out of their leases and replace them with more fuel-efficient vehicles. Although your situation is different, I am sure this is a question many people have.

Getting out of a lease early on a vehicle can be difficult and costly. But there are some solutions. This is a good time to pull out your lease contract and review it.

Here are some the items that are included in your lease contract that will let you know where you stand with your agreement. Many leases require you to complete all payments within the lease. If you pay the lease off “early”, some will also require you pay an “early termination fee”. This can range from $150-$350. Also, you can be charged a “wear and tear” charge if there is any mechanical damage to the car. And some leasing companies charge a monthly “garage fee” for the months remaining on the lease.

There is still more. Some leases say you are responsible for the difference between the “residual value” that was previously set forth in the contract and the actual “market value” for vehicle. This can be thousands of additional dollars.

To summarize, the lease can hold you responsible for the remaining payments, an early termination fee, wear and tear fees, garage fees and the difference between the residual value and market value of the car.

Not all leases have these additional fees, but you should check your lease carefully to where you stand. This shows you how important it is to negotiate a good lease contract on the front end.




What are your options?

You can attempt to sell the car. You must verify, in writing, what the final “pay-out” for the car is from the leasing company. Then you must sell the car for this amount or greater.

The difficult thing about this is that some lease final “pay-out” amounts are $2,000-$5,000 higher than you will be able to receive for the car. I know this is not a good option.

There is another relatively new option for getting out of an auto lease early that does not involve all of these financial penalties. It is “lease trading”.

You can go to www.leasetrader.com and list your vehicle for $40. The site will post the information about your vehicle, including the lease amount, remaining lease payments and a photo for the $40 fee. A similar service is available from www.swapalease.com.

Prospective buyers of your lease must register and have their credit approved before they are permitted to contact you. The site has a standard “lease transfer agreement” that has been approved by most leasing companies including GM, Audi and BMW. There may be a one-time lease transfer fee (usually the amount of one lease payment), but that will be the only fee you will pay. The “lease purchaser” is responsible for picking up the vehicle in your city and transporting to their location.

Although, not everyone finds a “lease purchaser”, it may be worth $40 to avoid the costly alternatives.


Ways to Wealth

By: Elaine Zimmermann


Martha and Dudley: We have just found out that we are being transferred overseas for two years. Our car is leased. Is there anyway we can get out of the lease without hurting our credit?

Elaine: With gas prices on the rise again, there are probably many people with gas-guzzlers that would like to get out of their leases and replace them with more fuel-efficient vehicles. Although your situation is different, I am sure this is a question many people have.

Getting out of a lease early on a vehicle can be difficult and costly. But there are some solutions. This is a good time to pull out your lease contract and review it.

Here are some the items that are included in your lease contract that will let you know where you stand with your agreement. Many leases require you to complete all payments within the lease. If you pay the lease off “early”, some will also require you pay an “early termination fee”. This can range from $150-$350. Also, you can be charged a “wear and tear” charge if there is any mechanical damage to the car. And some leasing companies charge a monthly “garage fee” for the months remaining on the lease.

There is still more. Some leases say you are responsible for the difference between the “residual value” that was previously set forth in the contract and the actual “market value” for vehicle. This can be thousands of additional dollars.

To summarize, the lease can hold you responsible for the remaining payments, an early termination fee, wear and tear fees, garage fees and the difference between the residual value and market value of the car.

Not all leases have these additional fees, but you should check your lease carefully to where you stand. This shows you how important it is to negotiate a good lease contract on the front end.




What are your options?

You can attempt to sell the car. You must verify, in writing, what the final “pay-out” for the car is from the leasing company. Then you must sell the car for this amount or greater.

The difficult thing about this is that some lease final “pay-out” amounts are $2,000-$5,000 higher than you will be able to receive for the car. I know this is not a good option.

There is another relatively new option for getting out of an auto lease early that does not involve all of these financial penalties. It is “lease trading”.

You can go to www.leasetrader.com and list your vehicle for $40. The site will post the information about your vehicle, including the lease amount, remaining lease payments and a photo for the $40 fee. A similar service is available from www.swapalease.com.

Prospective buyers of your lease must register and have their credit approved before they are permitted to contact you. The site has a standard “lease transfer agreement” that has been approved by most leasing companies including GM, Audi and BMW. There may be a one-time lease transfer fee (usually the amount of one lease payment), but that will be the only fee you will pay. The “lease purchaser” is responsible for picking up the vehicle in your city and transporting to their location.

Although, not everyone finds a “lease purchaser”, it may be worth $40 to avoid the costly alternatives.







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Ways to Wealth

By: Elaine Zimmermann

Ginger and Andy: We just found out it will cost $3200 to replace our broken built-in double oven! We can’t afford that. Help!

Elaine: Ouch. I do have a few solutions for you that may make this situation less painful for you.

I have spoken to many renovators and owners of rental properties and here are the cost-saving things they do to save money on replacement appliances, plumbing and lighting fixtures as well as replacement doors, cabinets and windows.

Many professionals buy new home improvement items from www.overstock.com or www.amazon.com They carry new faucets, jetted tubs and microwaves as well as cabinet pulls and other items at reduced prices. They buy left-overs from manufactures but have very limited quantities. If you see something you want, you should order it immediately. The guarantee their products and currently all shipping is $2.95, regardless of the weight of an item. And there is no sales tax.

Also the major home improvement stores sell “overstocks” and returned “special orders” on one Saturday each month. You can find items as much as 80% off.

I purchased a new front door this way. It was originally $850 and it cost $150.

(Special note about purchasing doors: besides knowing the exact size of the door you are replacing, you will need to know if the door opens in or out and which side the door knob is on. Let’s just say I have too much experience with this little error).




Habitat for Humanity ReStore




Finally, is the most amazing find of all. Habitat for Humanity, which builds homes for low-income families, also sells building supplies and home improvement products and appliances in their “ReStore” to the general public.

They accept donations of new and “working order” appliances and home improvement products for the homes they build. Those items they do not use in their construction projects they sell to the general public.

A quick check of their store, I found dishwashers, washer and dryer sets, windows, doors, cook-tops and double-ovens. New. With the original manufacturer’s instructions. Instead of $3200, their price is $100. Of course, it is cash-and-carry for all items and you must find an installer. But this type of savings warrants a little more effort on your part.

The Habitat for Humanity ReStore is staffed by paid staff and volunteers. Most have only one phone line, so it is recommended you go by in person to see if they have an item. Also they can not “hold” items without payment. They accept cash and credit cards only.

check their website to see a sample of the items they have in stock. Things sell quickly, so the website is only a sample.

Please remember this is a charitable organization. If you can pay a little more for the double-oven, do so. You will be helping a wonderful organization.







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Ways & Woes to Wealth

By: Elaine Zimmermann




Debbie and John: A good friend of ours was laid-off a few years ago and needs to replace his car. His credit is very bad and he has asked us to co-sign on the loan. We don’t know what to say?




Elaine: I have had several questions like this so I am going to answer yours and several others at the same time. A few of you have asked similar questions regarding co-signing on home loans.

Let’s talk about what co-signing on any type of loan means. It means you are as legally responsible for this debt as the person you are co-signing with. The way you must evaluate this situation is the way you would evaluate the decision if you were the only person on the loan.

Let’s take for instance this car your friend wants to purchase. If you were purchasing a car today, is this the car you would purchase? Is the amount they are paying for it what you would pay for it? If they default on the note, can you afford to make the payments on the car? Would you be able to sell the car for the price they are paying without taking a loss?

These questions are the same you should ask yourself if you are being asked to co-sign on a house note. If the other party defaults on the house note, do you have enough extra income to pay that note? In this cooling housing market, you have to realize that you may be responsible for this additional house note for more than a year until you are able to sell it.




What happens if they default?




In all business and personal matters I believe you should “hope for the best but be prepared for the worst.”

Let me give you a few illustrations of what can happen when one party defaults.

In the case of a car, people can drive it to another state. This is also true of mobile homes and boats. (Most mortgage lenders have stopped financing mobile homes for this reason.)

I mention these because I know of several examples where this is exactly what happened. The other person on the note had to continue making payments on an auto they had no way of retrieving.

Even though people can not drive away with a home, they can make it just as difficult for you to dispose of it if they stop making the mortgage payments.

They may not be willing to leave or even allow you to show the house to prospective buyers so you can sell it.

As some of you may know, I am a published book author on real estate investing. I have had rental property over the years. At one point, I had a rental home I was attempting to sell. The tenant did not want me to sell the house, but he could not afford to buy it. So he did everything he could to make it difficult to sell the house.


A showing?

This is funny now, but horrifying at the time. The realtor would call the tenant an hour before she arrived with prospective home buyers. Because this male tenant did not want me to sell the house, he would answer the door totally naked! He said he had just “gotten out of the shower”. One real estate agent called me very upset. So I called my listing real estate agent and explained the problem. She told me not to worry about it and every time she went to the house she brought a towel. (You got to love a real estate agent like that!)

My advice is it that is often better to lend someone money than sign on a note for anything. If they pay you back in the future, fine. If they don’t, then your credit is not exposed. (Along with other things.)

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Ways to Wealth

 Elaine Zimmermann


Cheryl and Bob: We have recently purchased a new home. We were considering putting a fence around the backyard, but the cost is prohibitive. Our yard looks into our neighbor’s backyard. We feel as though we have no privacy. Any ideas?




Elaine: Fencing can be very expensive. One idea is to contact your neighbors who live around you and see if they will “contribute” to a fence. Many times, several neighbors are wishing for a fence but are under the same financial restraints as you.

You want to make certain the fence is within your property if you are paying for most of it.

Another idea, if you are not trying to keep a pet in your yard, is to purchase bushes to form a hedge. There are many inexpensive types that grow quickly. You will want something that is dense and needs little care.

I spoke with many people and for the large quantity of shrubs you will probably need, it was suggested you consider buying the shrubs online and have them shipped to you.

One company that many people have been happy with is www.directgardening.com

They have some varieties of honeysuckle bushes that grow to 10-12 feet and cost about $1 a bush. They come in a multitude of varieties with various colored blooms. They are very fragrant and may be a nice addition to your property. If you need 30-100 bushes, which I am assuming you will, this will not break your budget.

As you can imagine, shrubs with thorns are a good deterrent for wild animals you want to keep off of your property. The Robin Hood rose hedge grows to 6-8 feet and has small brilliant red rose clusters in the spring. It requires almost no care (it grows well in Texas, which gives you an idea how durable it is). It grows to its full height in 2-3 years and its branches are thorn-laden. They cost about $4 each, but also may be a good alternative for you.

Finally, in a recent column, I mentioned the Habitat for Humanity ReStore. They sell appliances and building supplies to the general public, including fencing materials.

These materials are donated to this charitable organization. Anything they do not use in their home construction for the working poor, they sell at their ReStore.

Because their entire inventory is donated, there is no guarantee they will have fencing material the day you visit their location. Also, if there is not enough lumber for your project, there is no guarantee they will have any additional matching lumber in the future.

If you do purchase the lumber from them, you will be responsible for transporting it to your property and installing the fence. This may be a project you and your neighbors do together.

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Ways & Woes to Wealth

By: Elaine Zimmermann


Joan and Ronald: I read your recent article about checking for an existing patent on a product. I see celebrities with products with their names on them. Do they manufacturer the products? I have a product idea but I don’t want to be the manufacturer.


Elaine: These are great questions. For those of you who saw the new product contest on the “Oprah” show where the winning product idea was to be sold on QVC at a later date,

I am sure many of you were wondering how to get a product manufactured and brought to market. The great news is manufacturers want new product ideas and will “license” your product, then pay you.

In the case of celebrities, many of them have their names “attached” to products which they do not manufacturer. Some of them do manufacturer their “logoed products”. Remember the furor when Kathy Lee Gifford was accused of using underpaid workers overseas? In your case, it may be wise for you not to manufacturer your first product.

So how do you get started? Let me give you a wonderful example to motivate all you “would-be” inventors. Do you know who Charles Darrow is? Well you do know him, or his invention actually. He was an out-of-work plumber in Allentown, Pennsylvania. In 1933 he had an idea for a board game and took it to Parker Brothers. They licensed the game and he and his heirs have never worked a day in their lives since. You’ve probably guessed it. He designed the Monopoly game. Which became his Boardwalk and Park Place.

I hope this story demonstrates a couple of things that should encourage everyone. First, Darrow knew nothing about manufacturing. Second, he knew nothing about toy marketing or packaging. Yet he had a fabulously unique idea and the tenacity to take it to the right place. I can only image what his friends and family thought while he was working on this and what they said. Can’t you just hear them? “You’re a plumber. What do you know about toys? Who is going to buy an idea from you? Why don’t you invent a new washing machine?”

Licensing your product idea




Let’s use the Monopoly board game example to explain what you need to do to have your product licensed to a manufacturer, like Parker Brothers. Like the Monopoly game, Darrow took his idea to a manufacturer of board games. You will have to identify manufacturers of items similar or in the same category as your product idea.

What did he take them? He had a prototype of his product and a strong “product name”.

The name “Monopoly” is memorable and very descriptive of what the game is about.

So if you have a unique product, give it a short, memorable name. One or two words is best.

I am sure you are wondering if a company will try and steal your idea. Do I need a patent before I speak to a manufacturer? Not usually. Your best initial protection before you spend the money to patent an idea is to protect it with copyrights and trademarks. Using the Monopoly game again, you can not patent the action of the game, throwing dice and moving pieces around a board. Most board games have this component to them. But the name and “look” of the game can be copyrighted and trademarked.

Some industries require you use an agent to sell to manufacturers; others do not. Check the internet for manufacturers of items similar to yours. Then contact them. If they say they only work through agents, they can be found on the internet. There are also inventor associations throughout the state if you run into a brick wall.

Now the answer to the question everyone wants to know. How much will I be paid? You can expect to receive about 5% of the wholesale (not retail) cost of each of your product sold. This may not sound like a lot, but your product may turn out to be the next Monopoly game.


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Ways to Wealth

By: Elaine Zimmermann




So many people are struggling financially while others are worried about their financial futures. These are actual people with the problems they’ve faced or the questions they’ve asked.




Cindy—I just read about the credit card information being stolen at a major chain store. I shopped there in the past, what should I do?




Elaine: Identity theft is rampant throughout the US. This is one example of how it occurs.

T. J. Maxx had 45.7 million credit card and debit card accounts stolen. The good news is that according to the Boston Globe, “75% of these cards were expired or masked, meaning the data was stored as asterisks.” The bad news is that leaves another 25% of the 47.5 million, 11.4 million card holders, still vulnerable. You may be one of them.

Even if you did not use a credit card or debit card, but you returned merchandise to T. J. Maxx without a receipt, which 455,000 customers did, your personal data including driver’s license number was also compromised.

Back to your question. My bank reissued my debit card because of the T. J. Maxx situation. I am sure your bank would be happy to issue you a new card and cancel your existing card.

Let’s talk more about identity theft and how to prevent it, only to some degree as the T. J. Maxx incident has shown, and how to identify if it has occurred to you.

Unfortunately, January--April, is the worst season for identity theft. This is because W-2’s and 1099 are being mailed during these months. These documents have your social security number and earnings. This information is highly prized by identity thieves.

If you do not receive your W-2 or 1099, verify with your employer that it has been sent.

Also, verify that your employer has your correct address and zip code. If they have the correct information, you should check your credit to see if any new credit cards or loans have been issued against your identity. You are entitled to one free credit check a year by the three credit bureaus: Experian, Equifax and TransUnion. All three bureaus have websites. If you suspect possible identity theft, you should subscribe to a monthly service so you can check you credit monthly. Also, report missing mail to your post office.

The T. J. Maxx situation was well-publicized. What isn’t so well-known is what identity thieves do with this type of information.

One tactic is called “$1 scam”. After an identity thief obtains your information, he may wait a month or longer before charging anything to any of your accounts. Sometimes he will add a “$1” charge to see if you notice it. If you don’t, and take no action, the next charge may be for $1,000. He assumes it will be months before you take action and by then his trail is covered and cold.

I know of a case where a man financed a computer from a major manufacturer. After paying the monthly installments for a few months with checks from his business bank account, a $10 debit was charged against that account bearing the computer manufacturer’s name. It was three months before he noticed it and went to his bank to report it. The bank blocked additional debits of $10 and investigated their source. It was discovered that the debits were not from the computer manufacturer and the bank could not identify from where they were originating. The bank refunded two of the debits (which is standard bank policy).

This was most probably a security breach within the computer company’s finance records. You can imagine if this manufacturer has millions of finance customers that many will not notice the $10 charges for months. And many will wrongly assume it is a service they signed up for when they purchased the computer system. Many of these multi-million dollar schemes are run overseas, which them more difficult for authorities to prosecute.

There is no way to totally protect yourself against identity theft. One of the best precautions is to mail all your bills at a post office; do not leave them in your mailbox. Thieves have been known to open mailboxes at night and remove the out-going mail.

Also, check your credit card and bank statements on-line or when they arrive in the mail. Be alert for small debit and credit charges as well as large ones that you do not believe you authorized. Have your bank or credit card company investigate anything that is suspicious.

Check your credit report regularly. Verify that no new credit accounts or loans have been opened in your name.

Finally, Tennessee drivers’ licenses have your social security numbers on them. You can request it be removed. I recommend this for every one.


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Make $100 telling them what you think


By: Elaine Zimmermann

Tamara and Bob: I was wondering about those companies that say they will pay you to do surveys. Are they legitimate or just scams?

Elaine: To answer your question let’s start with those sites that advertise on the internet.

Many of you have probably seen the advertisements which promise large sums of money for completing surveys. In most instances, this is not the case. Most of the on-line companies that do this type of solicitation lure people to their sites with the promise of large dollar amounts rarely deliver. Be especially suspicious of companies that ask you for credit card information. If they are going to pay you, why do they need your credit card?

Some internet survey companies offer you points that can be redeemed for prizes or mileage rewards on a frequent flyer program. Some of these are legitimate offers. These rewards may be of interest to you. Most major retailers and airlines will not associate with scams operations.

Some of these research companies are compiling a database of consumers which they will resell to advertisers. For instance, let’s say in the information you provide you state that you have a child under the age of three. This is important to baby product companies. So your name and information may be resold to companies that want to reach women with young children. So you may begin getting emails and direct mail from companies with products that they wish to sell you. Remember, this is not identity theft or spam because you freely gave them your information

But this may not be a bad thing. You may be interested in the offers you receive.

Just as in any situation, be sure you know who you are giving your information to and how it will be used. Most websites have “Privacy Policies”. These will tell you how the information can be used.

Where’s the Cash?




According to Judy Patton, Knowledge Suite, “Peoples’ opinions are very important to companies”. She continues, “Companies want to bring new products to market that consumers want. Consumer research is critical when it comes to gauging a product’s chance of success in the marketplace. It is used to determine how cars are designed and food products taste.”

When I asked her about participants being paid for their opinions she said, “We pay our focus group participants $50-$100 for some surveys. They normally require 2-3. Our clients have specific demographics in mind and not everyone is a candidate for every research project. People can go to our website at www.knowledge-suite.com and sign-up to be considered for a focus group or individual opinion survey.”

When I asked her about the opinion polls being conducted in the malls she explained, “Those are legitimate research projects and participants are often paid. We are conducting a taste test of a new food product and we are using eight mall surveying sites nationwide to generate a thousand opinions.” These participants are not paid as much as focus groups participants because they only require 10-15 minutes of their time.

Hard to believe but if you’re looking to make a little quick money, go to the mall.


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Ways to Wealth

By: Elaine Zimmermann

So many people are struggling financially while others are worried about their financial futures. These are actual people with the problems they’ve faced or the questions they’ve asked.

Barbara—Widow, 78, Retired School Teacher .

Condo home and auto are paid for. Savings $200,000+

Fixed monthly income from teacher’s pension and Social Security.

Monthly disposable income after living expenses--$680.

Barbara’s concern—What if I need in-home care, will I have enough money?

I want to avoid going into a nursing home unless it is absolutely necessary. If I do going into a nursing home, I would to go to the facility, near my daughter’s home.

Elaine: I recommend you purchase long-term care (LTC) insurance, if you can afford it.

Because you were part of large organization, I recommend you initially contact your state’s teachers association to see if they offer a policy. In many cases, a large group will have lower premium prices for its members than if you bought the policy as an individual. Also they may require no physical exam. Policies sold individually may disqualify persons with pre-existing health issues or inflate their premiums making them unaffordable. Barbara, I do not know your health situation, but this may be as important a consideration as the premium cost.

Also, many LTC policies will not accept persons over the age of 80. You should contact them immediately.

Generally, a good LTC policy will allow you to receive in-home care or nursing home care if you need it in the future. The daily amount the policy will pay for nursing home or in-home care varies and is determined by the coverage you purchase. You will be able to use the funds at most nursing home facilities.

All policies have an elimination period—the amount of time you must pay charges before your coverage begins. The longer the elimination period; the lower the premium amount.

Currently nursing home care costs varies from $3,500-$7000 a month with in-home care 50% or more less than that. Looking at your assets, it would be advisable for you to choose a longer elimination period. You have enough cash reserve to pay for the first 90 days of care. Choosing a 90-day elimination period will lower your monthly premium.

Unlike auto and home insurance, LTC premiums are projected to remain relatively stable for as long as you own the policy. (This is important to Barbara, who is on a fixed income.)

Many people mistakenly believe that their health insurance will cover these expenses. It will not. There is no health insurance policy that pays for long-term care.

Other people believe Medicare will pay for their nursing home care. This is only true if you are “financially destitute”.

Barbara is not “financially destitute”. She has assets and owns a home. She would like to stay in it as long as is possible. If she needs in-home care, her policy may pay the majority of her in-home care expenses.

I’m sure you have heard of people who sold their assets and gave them to their children so they could be declared “financially destitute” before entering nursing homes.

The government became aware of this kind of fraud several years ago and now checks the previous three and a half years financial records for persons declaring to be “financially destitute” to verify their eligibility.

A LTC policy should not take more than 50% of Barbara’s disposable income and should give her the peace of mind she seeks.


Pre-foreclosures; Getting There First Can Reap Rewards

By Elaine Zimmermann

Buying a foreclosure can be a lucrative investment. Finding a foreclosure before anyone else or a "pre-foreclosure" allowing you to be the only person negotiating with a motivated seller, can give you an additional advantage.

Understanding the foreclosure the process gives you some insight into locating foreclosures at their earliest stages.

The Federal government forecloses on hundreds of thousands of homes each year that have been financed through several of its funding source: Veterans Administration (VA), Housing and Urban Development (HUD), FANNIE MAE and Federal Depository Insurance Corporation (FDIC). These homes can make lucrative investments and there are many special programs to allow purchasers to buy these homes with little or no down payment and many have repair allowances.  Once the homes are taken back by these federal agencies they appear on the http://www.foreclosuresus.com database.

Banks and financial institutions take back homes that they have loaned funds against.  They refer to the properties they retrieve as REO’s or real estate owned.  Within larger banks, they are REO departments solely devoted to the resale of these properties.  Banks supply their REO listings to the foreclosuresus.com database.  Most contain the bank’s name and the contact person’s name and phone number.

New homes can also appear on bank REO lists.  Builders who build "spec" homes, homes not presold but built "speculatively", finance the construction through banks.  Sometimes when a builder has several homes that have remained unsold for an extended period of time, the bank will take back the homes. These homes will also appear within the bank’s REO listings.

Extra Effort Can Reap Big Rewards

 

In some cases and with some additional effort, you can find these homes prior to going into foreclosure or pre-foreclosures.  In the case of bank REO’s, when reviewing the list of banks and their contacts become familiar with local contacts of REO departments at banks in your city.  As you become acquainted with these contacts, you can tell them the type of home you are looking for and the area.  If you check back on a regular basis, you may obtain information on homes prior to it being added to the public database.

When you review the database further, you will notice that many smaller banks do not include their REO listings. They may have too few foreclosures to have a REO department.  You should contact these institutions directly and ask who is the person designated to dispose of these properties.  Again, your effort may reap you information about properties that are not in any public database.

Another source for finding properties prior to foreclosure is real estate agents. When you have decided on an area where you wish to purchase a home for yourself or as an investment, you should contact an agent familiar with the area. Many times real estate agents have clients who need to sell quickly.  

As you become familiar with an area, you may notice homes that appear to be vacant without any "for sale" sign.  You can obtain the phone number for the address from a reverse directory.  Many times, when people leave a home they forward their calls to a cell phone or other number.  You may reach an owner ready to sell quickly.

Your local newspaper can be another source of pre-foreclosures.  Check for "For Sale By Owners" and "Homes For Rent".  Sometimes these are the last efforts of homeowners who are struggling, but cannot afford to sell their home through a real estate agent. 

You can also use your newspaper proactively to find pre-foreclosures.  When you have identified the area in which you wish to purchase, place an ad in that section. If you wish to obtain investment property your ad will be "Will Buy Your Home, You Stay in Your Home and your phone number".  In this case you purchase the home from the seller and then either lease or lease/purchase it back to them.  If you wish to purchase the home without tenants, you can run a similar ad without the option of the seller remaining in their home.

Finally, public court documents give you information about homes 30-180 days from foreclosure, pre-foreclosures.  In every state, a legal notice must be filed before a foreclosure can be finalized.  The length of time between the initial legal action and the final resolution varies nationwide, but the procedure is the same. In most states, a "forcible detainer" is filed.  It may indicate the property address, name of the homeowner and amount owed.  This action is filed prior to the actual foreclosure and gives you enough information to contact the homeowner directly.  In many states, forcible detainers are also used to evict apartment dwellers, so you must check the address of the property to determine if it is a home or an apartment.

Buying a foreclosure or a pre-foreclosure from a motivated seller can be a good investment for you and in the case of pre-foreclosure a good solution for someone else.

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Investing in Foreclosed Real

Estate for a Higher Return

By Elaine Zimmermann

With savings interest rates at a 30-year low and the stock market looking too perilous for small investors, many people are putting money in an asset they understand -- real estate.

One of the best places to invest is in foreclosure and bargain residential real estate.

The current market conditions make it a perfect time for a small investor to purchase one or more foreclosure properties for their private residence, rental or resale. In this difficult economy, more upscale homes are going into foreclosure, so the notion that foreclosure homes are only available in crime-ridden areas is inaccurate. Beachfront and homes in affluent areas are part of the mix of foreclosed properties available.

Homes valued at $200,000 to $400,000 regularly appear in the national listings that can be found on http://www.foreclosuresus.com. The availability of more desirable properties combined with the reduced interest rates allow many people to qualify for the mortgages on these homes.

Last year, one man purchased a Florida ocean-view, four-bedroom townhouse in foreclosure for about $100,000. He renovated the home in his spare time, spending about $12,000 for materials, cabinets and fixtures to bring it up to "like new" condition. He recently sold it for $197,000, giving him an $85,000 before-tax profit.

He also purchased an inland foreclosure property that after renovation has also doubled in value. He decided to rent the second one. The inland property's rent exceeds the monthly mortgage note and expenses by about $500 a month, giving him $6,000 annual income from the property.

Many owners of homes that go into foreclosure have been struggling financially for almost a year before they give up, which usually means that the house has not received needed repairs or general maintenance for a while.

This may include everything from light bulbs not being replaced to roofs leaks not being repaired. Tree limbs in front yards, broken appliances and windows and dirty carpets, floors and walls are found in very affluent-area foreclosures.

The first rule of real estate, "location, location, location," applies in these situations. If there is trash in every room of the house, but the foreclosure is in a good area with high property resale values, hold your nose, walk through the entire house and consider making a low offer.

Hidden foreclosures
Not all foreclosures are previously owned homes. Some foreclosed homes are new. These homes are not as easy to identify and rarely appear on national lists.

The slow economy has left many builders of new mid-scale and upscale homes without a market to purchase them. With thousands of homes for sale in every city, some builders have reached the end of their construction-loan periods without finding buyers for their homes.

In these cases, the banks that issued the construction loans take possession of the homes and attempt to sell them, using real estate agents to handle the deals.

These too are foreclosures. They are "hidden" foreclosures because no one associated with the sale of these properties will refer to them as foreclosed homes.

In some cities, competition is fierce; in other cities it is nonexistent. In Mesquite, Texas and Collierville, Tenn., foreclosure homes are sold in one day to the top offer among many anxious bidders. In other cities, valuable properties sit for days without receiving one offer.

The climate of the competition for properties is largely dictated by the number of professional "rehabbers" in the area.

Rehabbers buy properties and renovate them quickly to resell them for a profit in 30 to 60 days. They have contract crews that help them complete the renovation work. They are constantly purchasing properties to keep their crews working.

But even in cities where rehabbers are present, a foreclosure home can be purchased. Many rehabbers had a maximum home price they'll pay that is very low compared with the value of other homes in the neighborhood. If you are willing to exceed their price by $3,000 to $5,000, you may obtain the home at a very low price but slightly above what a professional pays.

If you plan to do most of the repairs yourself and not employ a crew of subcontractors, you may have paid about the same amount for the home when you consider your savings on outside labor.

Getting started costs less than people think. With good credit, many banks will loan the full price of the foreclosure or more. If the home is to be used as a rental, many banks will require only a 10-percent down payment.

Individuals with a large amount of equity in another home may get a line of credit from their bank to purchase a foreclosure. When they convert the line of credit to a mortgage, no down payment may be required.

Foreclosure homes bought in good areas at below market values that appreciate annually can be a sound investment strategy for many investors. The appreciation of the homes is tax-exempt until the home is sold. If the home is a primary residence, the appreciation may be tax-free.

Homes used as rental properties give most investors valuable tax deductions while the house increases in value and builds equity. With many stock portfolios down 30 percent in the past 18 months, foreclosure real estate investing may be the alternative many people are seeking.

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Preforeclosures, Short

Sales/Buying From the Bank

By Elaine Zimmermann

Finding a foreclosure before anyone else or a "pre-foreclosure" can be a worthwhile investment.  Buying a preforeclosure from a bank as a "short sale" can guarantee the purchaser equity on the day of closing.  A " short sale" or "short payoff sale" is one in which the lender allows the property to be sold for less than the exiting loan balance.

Understanding the foreclosure process gives you some insight into locating foreclosures at their earliest stages.

The Federal government forecloses on hundreds of thousands of homes each year that have been financed through several of its funding source: Veterans Administration (VA), Housing and Urban Development (HUD), FANNIE MAE and Federal Depository Insurance Corporation (FDIC). These homes can make lucrative investments and there are many special programs to allow purchasers to buy these homes with little or no down payment and many have repair allowances.  Once the homes are taken back by these federal agencies they appear on the http://www.foreclosuresus.com database.

Banks and financial institutions take back homes that they have loaned funds against.  They refer to the properties they retrieve as REO’s or real estate owned.  Within larger banks, they are REO departments solely devoted to the resale of these properties.  Banks supply their REO listings to the foreclosuresus.com database.  Most contain the bank’s name and the contact person’s name and phone number.

New homes can also appear on bank REO lists.  Builders who build "spec" homes, homes not presold but built "speculatively", finance the construction through banks.  Sometimes when a builder has several homes that have remained unsold for an extended period of time, the bank will take back the homes. These homes will also appear within the bank’s REO listings.  

In some cases and with some additional effort, you can find these homes prior to going into foreclosure or pre-foreclosures.  In the case of bank REO’s, when reviewing the list of banks and their contacts become familiar with local contacts of REO departments at banks in your city.  As you become acquainted with these contacts, you can tell them the type of home you are looking for and the area.  If you check back on a regular basis, you may obtain information on homes prior to it being added to the public database.

When you review the database further, you will notice that many smaller banks do not include their REO listings. They may have too few foreclosures to have a REO department.  You should contact these institutions directly and ask who is the person designated to dispose of these properties.  Again, your effort may reap you information about properties that are not in any public database.

"Preforeclosure Short Sales" are not handled in the REO departments of banks, but rather in the "Loan Loss Mitigation" Departments. You can find current, nationwide preforeclosures at http://www.ipreforeclosures.com

Bank Loan Loss Mitigation Departments

When a borrower begins to miss payments the loan is sent to the bank’s loan loss mitigation department.  Most banks also consider short loan payoff sale requests in their loss mitigation departments.

Lenders only will approve a short sale as a last resort.  The circumstances that would lead a lender to resort a short sale for a property are directly related to the property’s value as it relates to the amount owed to the bank.  If a property was purchased in an inflated market that has experienced a severe downturn, the home may have decreased in value and the loan maybe "upside down"—more is owed than it is worth.  The lender may consider a short sale.  The same holds true if a property was refinanced at 100 percent plus leaving the property without equity.  Another circumstance where a bank may consider a short sale would be in the case of a deteriorating property with would require extensive repairs to make it marketable.

Lenders also require borrowers to show hardship before they will approve a short sale.
These can include financial hardship bought on by: catastrophic illness, death or divorce of a spouse, employment loss or incarceration of the borrower or borrower financial insolvency without any realistic chance of improving in the near future.

Cash Only

A short sale is always a "cash only" sale, which will keep many investors away.  Also, it is an "arm’s length sale", meaning you cannot purchase a home of a relative.  If you do you are open to a lawsuit and the sale being reversed.

Buying a foreclosure or a pre-foreclosure from a motivated seller can be a good investment for you and in the case of pre-foreclosure a good solution for someone else.  A "short sale" is one way to purchase a home with guaranteed equity to the investor.

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Foreclosure Tips & Traps

By Elaine Zimmermann

Buying a foreclosure can be a lucrative investment.  Your goal is to buy property far below market value so your investment already has substantial equity on the day you close.

Understanding the foreclosure the process gives you some insight into locating foreclosures at their earliest stages and avoiding some of the pitfalls.

The Federal government forecloses on hundreds of thousands of homes each year that have been financed through several of its funding source: Veterans Administration (VA), Housing and Urban Development (HUD), FANNIE MAE and Federal Depository Insurance Corporation (FDIC). These homes can make lucrative investments and there are many special programs to allow purchasers to buy these homes with little or no down payment and many have repair allowances.  Once the homes are taken back by these federal agencies they appear on the http://www.foreclosuresus.com database.

Banks and financial institutions take back homes that they have loaned funds against.  They refer to the properties they retrieve as REO’s or real estate owned.  Within larger banks, they are REO departments solely devoted to the resale of these properties.  Banks supply their REO listings to the foreclosuresus.com database.  Most contain the bank’s name and the contact person’s name and phone number.  These are people you should meet in person and tell them the type of property and zip codes you prefer.  Bring a letter of credit or prequalification with you.  In the case of bank, be sure you are prequalified at
their institution.

Pitfalls

Not all foreclosure listings are bargains.  In some cases, financial institutions will price the property based on the amount of outstanding loans on a property.  With 100% equity lending now available, this amount may be very close to the value the property.  If you purchase the property at this price you will have no equity at closing.

Auctions 

Home auction companies are nationwide.  Many of these companies require a minimum bid, which is almost the appraised value of the home.  Many times these homes are purchased by anxious buyers who get caught up in the excitement of the bidding and overbid on a property.  They pay the appraised value or more for a home. 

Auctions by municipalities offer far more lucrative opportunities.  These homes are sold for back taxes and to clear liens.  Homes worth $250,000 can be purchased for $100,000.  Successful bidders must fund the home purchases within 24-48 hours.  This means that a bidder must have a line of credit in place when bidding.  Because the properties are usually sold "as is", with utilities not turned on; no appraisals can be done.  This combined with the rapid requirement for funds, makes traditional mortgage financing unavailable.

Unlisted Foreclosures 

When you review the www.foreclosuresus.com database further, you will notice that many smaller banks do not include their REO listings. They may have too few foreclosures to have  a REO department.  You should contact these institutions directly and ask who is the person designated to dispose of these properties.  Again, your effort may reap you information about properties that are not in any public database.

Determining the Best Bargains

The key to obtaining a bargain is knowing the value of the property minus the required repairs and comparing that to the asking price/starting bid.

Online appraisals are now available throughout the Internet.  For about $10 you can receive a summary of the recent sale of homes in the immediate area.  These appraisals are compilations of public records of property sales and are meant to be used for estimating purposes only. 

Review the sales using the most recent and those closest to the property you are interested in as the most reliable.  Remember to adjust for differences in square footage and features. Overestimate the cost of repairs in your calculations.  As any home renovators will tell you, repair costs always exceed what you anticipate by 30% or more.

Properties that have been vacant for an extended period of time may have many hidden problems not seen during an inspection.  If you can, ask a neighbor about a property.
Also, if there are contractors working on the property, ask them about the property.
I have had contractors tell me about termite damage and mold problems that were not visible.  Of course, do not bid on properties with these types of problems.  The repairs are far too expensive.

Your Goal/Residence/Rental/Resale/Retirement

Your goal in buying a foreclosure is to benefit from the sale of property at below market value to use as your residence, as a rental property or to resell for a profit. You must do the investigative work yourself to garner a solid investment.  Many investors have merely purchased 2-3 good investments in their lifetime and completely funded their retirement with the proceeds.  Whatever your goal is, it is worth the effort it requires.

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Glossary

Abandonment A situation in which a homeowner leaves a home without any intention of returning.If there is a mortgage on the property a foreclosure will occur.Many times these are called "key tosses", where the keys to the house are left inside or mailed to the mortgage lender.

AuctionThe process of selling a property the highest bidder. In the case of foreclosures, there may be starting price, which is the lowest amount the lender will accept.In an

Absolute Auction of a foreclosure, there is no minimum price.

Bill of Complaint  The initial paperwork that is filed in many states to the foreclosure process.

Clean-out, Trash out  Business of removing debris from foreclosed homes. Learn more. http://www.kptv.com/story/15369745/is-it-true-i-can-make-money-by-cleaning-foreclosed-homes

Compromise Sale  A VA property sale in which the amount on the VA loan is greater than the home’s sale price.The VA may cover the loss.

Deed in Lieu of ForeclosureInstead of waiting until the lender forces the sale of a house in the foreclosure process, the borrower deeds the property to the lender.

Deed of Trust A deed of trust is a regarded a three-party mortgage arrangement between the borrower, the lender and a trustee.If the borrower fails to pay his mortgage, the trustee is preauthorized by the borrower to sell the house and apply the sales proceeds to pay off what remains unpaid on the loan secured by the deed of trust of give the deed to the lender in exchange for cancellation of some or all of the borrower’s debt.

DefeasedA legal term meaning to lose ownership as in the case of a foreclosure.

DeficiencyMoney a borrower who has lost real estate in foreclosure still owes to the lender because the foreclosure sale failed to generate enough from the sale price of the property to pay off the loan.

D’oench, Duhme DoctrineA legal term that state that when FDIC takes over a lender, they may disallow almost any counterclaims by borrowers against the lenders they have taken over. This clears the way for them to assume all loans and enforce all foreclosures.

Dutch AuctionAn auction, which begins at a starting price and is lowered until a purchase occurs.

Entry and PossessionA foreclosure method used in some states which the lender either peacefully or by court order takes possession of the property from the borrower.

Execution SaleThe sale of a foreclosed property by a sheriff pursuant to a court orders.

Fix and FlipSee Flipping and Hard Money.

Flipping, House FlipsThe selling of a house quickly, usually at a profit.

Often done with foreclosures.

ForbearancePrior to foreclosing on a property, a lender may agree to accept lower payments than originally agreed upon or added missed payments to the end of loan to help a borrower avoid foreclosure.This is normally handled by the lender’s Loss Mitigation Department.

Hard MoneyLenders for persons who cannot acquire funds through usual sources.Their interest rates are above the average. Some foreclosure investors who fix and flip acquire funds from these sources.

Holder in Due CourseThis legal document holds that a person or entity that obtains a note without notice of any borrower defenses to its enforcement may enforce payment of that note in a court despite any borrower defense or other reason for not paying.

Judicial ForeclosureA court-ordered foreclosure.  The lender must first file and win a lawsuit to foreclose.

Junior Lien holder   A holder of a right to foreclose on a property that is inferior to the first lien holder.

Lis PendensA recorded notice of a lawsuit in process, which may change the title of property.It is the first indication of pending foreclosure in some states.

Liquidating PlanA plan by which a borrower repays missed payments to a lender over time.Again this in lieu of a foreclosure.This handled by the lender’s Loss Mitigation Department.

Loan ModificationA procedure whereby a loans payment plan is altered due to the hardship of the borrower.This can include the rate, term and monthly payment amounts.

This is handled by the lender’s Loss Mitigation Department.

Loss Mitigation DepartmentThis is the lenders department to oversee delinquency of loans prior to foreclosure.See Forbearance, Loan Modification, Relief/Recasting and Short Payoffs/Short Sales.

Mechanic’s LienA lien allowed by law upon a building or other improvement upon land, as a security for the payment of labor done and materials furnished for improvement.Many contractors have acquired properties through this legal mechanism.

Mortgage LienThe right of a mortgage lender to sell a mortgaged property is the borrower fails to repay the loan as agreed.

Nonjudicial ForeclosureA foreclosure on a mortgage without filing a lawsuit.Many states foreclose on properties in this way.

Power of Sale ClauseThe clause in a deed of trust or mortgage, by which the borrower preauthorizes the sale of a house to pay off the balance on a loan in the event of the borrower’s default. Usually the trustee will hold the sale. In some states it is done by the sheriff’s office. Each of these foreclosures is called a sheriff's sale.

Relief/RecastingVarious loans will offer various types of special payment plans to assist struggling borrowers prior to them going into foreclosure.See Loss Mitigation Departments.

REOThe department that holds and disposes of foreclosure property within a lending institution.

Scire FaciasA court command to a borrower requiring them to appear at hearing to show why a foreclosure should not be authorized.

Short Payoffs/Short SalesThe sale of property prior to foreclosure at a reduced amount.  See Loss Mitigation Departments.

Strict Foreclosure   A legal premise in some states that the lender owns a property and may simply evict the borrower for nonpayment and gain full and complete title free of the borrower’s right to redeem after the prescribed waiting period has passed.

Trustee’s Deed   A type of deed issued to the buyer at a trustee foreclosure sale.

Vendee Loan   A VA Loan made to help the VA resell a VA foreclosure.  Can be given to a non-vet.

Warranty Deed   A deed in which the seller guarantees or warrants that good title can be traced back in time when the land was owned by country.

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