Would a Financial Consultant Say, “Whaddya, Nuts?”

By Bill Primavera

The Home Guru

If only I had known a financial consultant like John Settembrino when I was a young homebuyer.  Being somewhat naive about the financial responsibilities of home ownership when planning a move to the suburbs, I just selected the home I loved with no real concept of what I should be spending for a house or what its monthly expenses would prove to be.

Had John accessed my financial standing at the time, comparing my income with what I was spending for mortgage, tax, utilities and home maintenance, he might have asked, “Whaddya, nuts?”

As owner of Professional Financial Consultants in upper Westchester, John offers counsel to young and old alike, but, he says, “It’s particularly important for first-time homebuyers to be aware of certain issues and to have a financial plan in effect that guarantees a family’s financial future.”

When I acquired my first home in New York City, I did have a plan, and it was called magical thinking. Would you believe that as a naïve 20-something public relations account executive, I managed to buy an historic Federal house in Brooklyn Heights with not a cent in savings and no down payment?  Doesn’t that sound like one of those TV “infomericals” about real estate wheeling and dealing?

Here’s how it happened. I had a free-lance client in the male toiletries business (imagine trying to promote a line of products for men called Tom Cat?) who knew that my wife and I, apartment dwellers at the time, were looking for a rental shop to sell antiques we had been collecting. By coincidence, my client owned a Federal home with his own weekend antiques shop on the first floor, his living quarters on the second floor and a duplex apartment, rented, above that.

One day when he decided that his new toiletries enterprise was not going as well as he anticipated, he suggested that we take over the operation of his shop. “As a matter of fact, why don’t you just buy the whole house?” he asked. I gulped knowing that not only did I not have any savings, but was in debt from a touch of compulsive collecting.

When I shared my financial situation with him, he suggested that I might assume the principal mortgage from the bank, along with a second personal mortgage he held with the home’s former owner, plus yet a third personal mortgage he would take with me. In addition, he would give me six months to raise money for the cash payment of 20 percent of the cost of the house.  I accepted the absurd offer and, as for raising the money for the down payment, I decided like Scarlett O’Hara that I’d think about it tomorrow.

Then the miracle happened. I wrote to The New York Times suggesting that it might consider a feature about a young couple who bought a home without any money and who were willing to sell all their furniture and accessories through their weekend antiques business to make the down payment. The idea was accepted enthusiastically and soon our story appeared, claiming three quarters of a page in the lifestyles section. The following weekend, there was a line of people waiting to get into our little shop and, in only three months, we had earned enough in profit to cover the down payment. 

Magical, right? But it could never happen today, now that lenders are “purer than Caesar’s wife,”  albeit a bit late.

When my wife and I decided to move to the country, we sold our “miracle” home, making a profit that gave us the money for a good down payment on our current home. However, like the warning John Settembrino gives new homeowners, when I bought the house, I didn’t factor in the annual increases in town and county taxes and the extraordinary increases in school taxes. And certainly I didn’t anticipate that oil prices would double the cost for heating in less than a decade.

“There are other basic questions that must be addressed with new homeowners,” John said. “For instance, do they have enough life insurance to cover the liability of a mortgage?  And what about disability income to make mortgage and tax payments in the event of sickness or injury?”

To meet such emergencies, John advises his clients to establish an emergency fund that should contain at least six months of hard costs associated with house expenses.

“And if new homeowners are relocating from another state, it’s vitally important to contact an attorney to redraft wills, trusts, and power of attorney to conform with state law, since many states do not recognize other state documents,” John said.  Who would think of that?

“It’s a good idea when buying a house in a new state or community to establish local relationships with legal, accounting and financial professionals who can guide new homeowners to financial security,” John advised.

At the other end of the spectrum, that is, dealing with senior members of the community who may be living in a house that’s too big for them as empty nesters, John suggested that they think about downsizing and locating a maintenance-free opportunity, possibly a good rental, where “all you have to do is turn the key in the door.”  Ah, that seems like a lovely prospect at some future date, and perhaps not that far in the future.

John Settembrino’s website is www.professionalfinancialconsultants.com.  He can be reached directly at 914-455-2200.

Bill Primavera is a licensed Realtor® affiliated with Coldwell Banker and founder of Primavera Lifestyles Marketing, a public relations firm. His websites are: www.PrimaveraHomes.com and www.PrimaveraPR.com.  For questions or comments about the housing market, or selling or buying a home, he can be reached directly at 914-522-2076.