August 2006 Archives

I am an adamant believer in the Non-exclusive Buyer's Agency Agreement. In practical terms, as opposed to the Exclusive Buyer's Agency Agreement, it is so much to the advantage of the consumer that it isn't funny, and it doesn't usually hurt good agents. On the other hand, the proponents have one argument going for them that I do respect, having experienced it more than once. I start a client on the searching process. I explain it's going to take looking at a minimum of 12 to 15 properties before they know what the market is really like in their area in their price range. I find a whole bunch of properties, and start taking them to a few. I offer rational, real world comparisons of their comparative virtues. Ask about what they liked versus what they didn't, what they could live with and what they couldn't. And then, in between, one or both partners gets a wild hair about going to view another property. I've explained what their price range is, but they either don't realize it's out of their range or don't care. They just want to see what it's like. And because the property is out of their price range, it's going to be a more desirable property - that's why it costs more money!

So they go out, and after my careful work of making sure to stay within their budget, on a sustainable loan they can afford, this othe agent shows them what, by comparison, is the property of their dreams and says they can buy it!, and he knows where they can get the loan! If this sounds familiar, it happens a lot. "Dan was showing us such ratty properties by comparison! This guy is showing us beautiful stuff we love! Let's buy one!" and the first I find out about it is they tell me they're in escrow on someone else's property.

Most people buy based upon emotion. If you want to make one change in the value of your financial future, learn how to take emotion out of your decision-making process, especially on anything big enough to require payments. Once people have emotionally convinced themselves that they deserve this property, my rational analysis of the situation doesn't have a snowball's chance in July of talking them out of it. I know this very well. I could stamp out buyer's transactions at the rate of three or four per week by showing clients two or three ratty fixers within their budget and then moving in for the kill by showing one immaculate property in ready to move in condition for thirty percent more. But I'd have problems shaving without looking in the mirror, and I need to shave every day that I work. The reason that wasn't within their budget is that they cannot afford the payments, or they cannot afford the real payments.

And that's why there is money in fixers. It's all very well for people to say they are interested in the $400,000 fixer that fits within their budget and that they can fix it up and sell. Particularly first time homeowners, particularly young married couples, and especially if they have children, show them the $600,000 move in ready and they will bite almost every time, budget buster or not. Put all three factors together and not all of the wisest people in history together could talk them out of it.

So the smart operator offers $350,000 for the fixer that's been on the market for four months, spends $40,000 on upgrades like carpet and modernizing the kitchen or adding one more bedroom and bathroom, and turns around and sells for $620,000, of which she keeps approximately $186,000 in profit. If the buyer needs them to pay some closing cost in order to make the transaction happen, she still makes $175,000 for a few months work. Not bad, eh?

Now the average couple don't have $40,000 to upgrade the property immediately. I don't know the last time I saw or heard of a first time buyer who wanted to put a downpayment. Most potential buyers right now don't have anything significant they could put down if they wanted to. But if they buy that fixer, they have a lot more room on their monthly budget and as much time as they want. At 6% interest rate and California standard property tax rates, the $620,000 loan has a payment of $3717, plus $646 in property taxes. The lesser property, even if they buy for $400,000, the payment is $2398 and the taxes are $417. I know that it's smarter to split the loan into two, but work with me for the sake of simplification. So the already fixed property costs $4363 per month, while the fix it themselves costs $2815. That's over $1500 per month difference they have to put towards fixing it up. In two years, they've got the $40,000 from that $1500 per month alone. This is leaving aside the issue that the rate on the bigger loan isn't going to be as low. They can concentrate on the most important updates. Sure, it's a pain. That's why buyers are willing to pay $620,000 for the ready to move in property. Actually, they'll line up to pay $620,000 for the more attractive property. It's just the way things are. And they get done with their two year project, and now it's worth every bit as much as the property that was worth $620,000 to start with. At 5% for two years, that's $683,000. If they sell, that's approximately $235,000 in their pockets (tax exempt in most cases) instead of in the professional fixer's. If they bought the move in ready property and then sold, they'd net about $15,000 by the same calculations.

Now most properties, even fixers, won't generate quite this kind of quick windfall. But that is a real example I encountered not long ago. Moral of the story: fix it yourself if you can. By isolating off the emotional appeal, you've made yourself - or saved yourself - a lot of money. And the reason there is money in fixers is because most people won't do this, instead convincing themselves that they're good people and they deserve this beautiful property. But if you deserve the beautiful property, you also deserve the huge cost, and the huge payments to maintain it, and you definitely don't deserve all the profit that the folks who buy the first kind of property make from the sale.

Caveat Emptor.


In the hope that maybe a little fresh air will clean it out

"Feds Say Air Controller Slept 2 Hours"

LEXINGTON, Ky. (AP) — In the day leading up to the crash of Comair Flight 5191, a federal investigator says the air traffic controller on duty had worked for almost 15 hours and slept for two.

National Transportation Safety Board member Debbie Hersman, the lead investigator in the crash that killed 49 people, said in her final briefing before leaving Lexington Thursday that the controller had only nine hours off between work shifts Saturday.

That was just enough to meet federal rules, which require a minimum of eight hours off between shifts, Hersman said.

"He advised our team that he got approximately two hours of sleep," Hersman said.

I worked as a controller for twelve years. In that time, the "backward rotation" or "phase advancing" was de riguer for controllers. This one evidently had nine hours off. More frequently, it's eight, the bare legal minimum.

At Los Angeles Center, where I worked for part of that time, the schedule is typical for the twenty-four hour facilities. Your first shift of the week started at 2:30pm, and you worked until 10:30pm. Then your next one started at 1:30, and ended at 9:30. Due to staffing considerations, lunch was subject to interruption for traffic, and you were not allowed to leave the facility, therefore the straight eight hour shift.

The next shift after that could be anything. Sometimes it started at noon, sometimes at 10, sometimes at 8, and perhaps at 6:30 am, leaving you only nine hours off between shifts. The fourth shift always started at 6:30 am and went to 2:30 pm. And finally the fifth shift could be another 6:30 start time, or it could be a 10:30 pm start time that same night. This left an individual controller with the following number of hours between shifts: 15, anywhere from 9 to 14.5, then between 16 and 10.5 depending upon the previous gap, and finally either 16 or 8. So whereas a worker with a regular shift has an aggregate of four 15 or 15.5 hour gaps, for a total of 60 to 62 hours of downtime during their work week, the controller has a total of either 56 or 48. It doesn't seem like much of a difference, between eight and fourteen hours. But the only place for that difference to come out of is sleep. They still have to drive home. They still have to unwind. Most folks need to eat. They still have to get ready for work, and they still have to drive back. Particularly during the rapid rotation shift that you would have every week, and especially if you had a mid shift so that you faced two rapid shifts forward, if you failed to get to sleep quickly during that period, you were a zombie during your next shift, as you were starting from a maximum of about five and a half hours of sleep, and losing sleep off that. I lived right in Palmdale, but many controllers there lived in places 45 minutes to an hour and a half drive each way (to be fair, some of them made a habit of using motels for the "quick turn" shifts.)

The FAA, for its part, always said (publicly) that it supported controllers who didn't feel sufficiently rested to work safely. However, in practice, if a controller called in with something like that as a reason, they could expect plenty of grief over it, ranging from a supervisor who let you know in no uncertain terms that they were unhappy, to putting records in your file, to using it as justification for a less satisfactory performance review than you might otherwise have gotten. The dichotomy between official position and what really would happen was clear, and you were in for no small amount of grief if you actually did call in because you felt you weren't rested enough to be alert. Nor could you count on your peers to be supportive, as it meant they had to work harder. Finally, the shifts where you were guaranteed to have the most accumulated sleep-debt were the day shifts, which were the busiest time, towards the end of the week.

Why is this done? Well, it was in place before the 1981 strike, but after the strike it sure made staffing a lot easier to manage. And of course if you offer people three day weekends every week, that's kind of attractive to the average person.

Now try this search: Effects on alertness of rotating shiftwork. Add the phrase "Air Traffic" in there, and you get all of this wonderful research, and more:

Effects on alertness of rotating shiftwork

advancing continuous systems seemed to be associated with marginally steeper declines in alertness across the shift (F (3,1080)=2.87, p<0.05). They were also associated with shorter sleeps between morning shifts (F (1,404)=4.01, p<0.05), but longer sleeps between afternoons (F (1,424)=4.16, p<0.05).


The absence of negative effects of advancing shifts upon the chronic outcome measures accorded with previous evidence that advancing shifts may not be as harmful as early research indicated. However, this interpretation is tempered by the possibility that difficult shift systems self select those workers most able to cope with their deleterious effects. The presence of quick returns in advancing continuous systems seemed to impact upon some of the acute measures such as duration of sleep, although the associated effects on alertness seemed to be marginal.

Shiftwork in the Practice of Emergency Medicine

Clockwise shift rotation (phase delaying) places less strain on the adaptive ability of the human internal clock than phase advancement. Such rotation has been shown to result in greater worker satisfaction manifested by fewer complaints about ill health and work schedules. Studies suggest a 20% increase in productivity with phase-delayed shifts compared with phase-advanced shifts.

With phase-advanced scheduling, for every hour of advancement, a full day is needed for entrainment. For example, phase advancement to an earlier shift every 7 days necessitates a week or longer to adapt after each rotation. Up to 25% of workers may not adapt. Studies suggest that the rotation most consistent with human circadian rhythm is 1 rotation every 21 days. Groups rotated at this rate have 70% fewer complaints than groups rotated every 7 days.

Into the Night: Coping with the Effects of Shiftwork

Sleep disorders can also occur, making it difficult during off duty to go to sleep, stay asleep, or experience a high quality of sleep. About 63% of nightworkers complain of sleep disturbance. Sleep length of night workers may be only 4-6 hours compared to day and afternoon workers who average 7-9 hours. This loss of sleep can become a "sleep debt" that robs an officer of energy and alertness. Evidence of sleep deficit can be seen in as short a time as 2 days of inadequate sleep, and with as few hours of sleep loss. Significant sleep deficit can accumulate after more than 3-4 nights worked in a row, and some researchers believe that a schedule of 6 nights in a row may be too exhausting (Scott, 1994). When this occurs, an officer can experience brief periods of "microsleep" in which normal activities are engaged in, but the person slips into light sleep for periods of 1-10 seconds. In one study of microsleep, participants were asked to press a button when a bright strobe light was flashed directly in their eyes every few seconds. During microsleep they did not notice the light or even that they had been asleep (Dement, 1974). Microsleep does not give a warning.

The psychological and behavioral effects of shiftwork can be equally troubling. When keeping a vigil, as in surveillance work, as early as 20-35 minutes after starting, concentration and attention can begin to lag (Krueger, 1989). Higher thinking skills are also affected. When fatigued, memory and recall are slower, logical and arithmetic reasoning have more errors, decision making is slower, and report writing and comprehension are not as good (Balkin & Badia, 1988). There is often a temptation to take shortcuts that can result in not following procedures, mishandling evidence, and safety violations.


Although there is no single work schedule that is optimal for all tasks (Krueger, 1989), many industries and emergency services have moved from three eight-hour shifts over several weeks, to two 12-hour shifts over about four days. Moving from 8-12 hours does not seem to significantly interfere with performance, and four days is about the limit of doing nightwork without making circadian changes (Folkand, 1992; Walker & Eisenberg, 1995; Williamson, Gower, & Clarke, 1994) . Studies examining such schedules have reported few ill effects and several improvements: increased productivity, higher morale, lessened fatigue, better time blocks for free time, improved family relations, reduced commuting, improved health, and more job satisfaction. Nonetheless, it is not possible at this time to recommend that all police departments convert to such a schedule. It is more advisable to design a schedule that fits the demands, risks, and personal needs of each organization.

NIOSH Update: (emphasis mine)

* As appropriate, employers might consider changes in shiftwork schedules — such as considering alternatives to permanent night shifts, avoiding quick shift changes, and adjusting shift length to the workload. Whether a particular change is useful depends on the specific work situation. When changing employees' work schedules, all aspects of the worker's job and home life should be considered, the publication suggests.

* Other potentially useful steps include scheduling heavy or demanding work at times when workers are most alert or at peak performance, providing training or awareness programs for new shiftworkers and their families, and ensuring that health care and counseling services are available to employees who work non-traditional schedules.

* Employees may consider various ways for coping with shiftwork, such as increasing their awareness of the need to get good sleep, establishing the sleep routine that works best for the individual, and looking at the utility of exercise, diet, and relaxation techniques for helping resist stress.

Shiftwork Annotated Bibliography: (emphasis mine)

This relatively comprehensive review article of research on shift schedules begins by stating, "All shift systems have advantages and drawbacks. There is no single 'optimum shift system' which can be used in industry or commerce at all work places. However, there are shift systems which are more favorable, and others which are less favorable, in the context of physiological, psychological, and social recommendations for the design of shift systems." (p.15)

Based on the research reviewed in the article, the author makes the following recommendations for shift design:

1. Night work should be reduced as much as possible, or rapid rotation should be used when needed. Slow rotation and permanent night shifts are not advised.

2. Extended workdays of 9 to 12 hours should only be used if the nature of the work is suitable. Further, where extended workdays are used, accumulated fatigue should be minimized through limited days-in-a-row.

3. An early start for the morning shift should be avoided.

4. Quick changeovers between shifts must also be avoided.

5. Consecutive days should be limited to 5 to 7 days. Additionally, schedules should include some free weekends.

6. The forward or clockwise rotation of shifts appears to be the recommended approach for continuous shift schedules.

this one has some counter-evidence:

In the UF study, 19 of the air traffic controllers worked two or three night shifts, from 4 p.m. to midnight, followed by two or three day shifts, from 8 a.m. to 4 p.m. The other 18 worked a rapid rotation of these two shifts, followed by a third one from midnight to 8 a.m.

Over seven days of computerized testing, the controllers working the rapidly rotating three-shift schedule demonstrated a quicker reaction time during a series of spatial visualization and tracking tasks on the computer, McAdaragh said. They also improved their attention skills when learning a new cognitive task, while the other group did not, he said

(But I found no evidence they considered shiftwork rotating in the opposite direction)

but hits the nail on the head for the reason:

Air traffic controllers tend to prefer these counterclockwise rapidly rotating work schedules over weekly rotating schedules anyway because of the greater breaks they provide between work weeks, he said.

Now the research appears to be strong, if not unanimous, that rotating shifts in this fashion has detrimental effects upon alertness, alertness which is the controller's primary stock in trade. It doesn't matter how great my Plan For The Situation is if some pilot does something unexpected and I don't notice right away. The sooner I see it, the sooner I have the possibility to fix it. The longer the situation goes, the worse it gets. And in this situation, the controller who got two hours sleep didn't notice at all. Perhaps he wouldn't have noticed anyway, and it is supposed to be the pilot's responsibility to fly the aircraft in accordance with directions. Nonetheless, in practice, particularly for itinerant pilots at commercial airports, you do have to keep an eye on them to make certain they don't do stuff like take off on the wrong runway, as happened here, or just taxi across the active at the wrong time. Nor is this the first time such concerns have been cited as a contributing factor. A more alert controller would have a higher likelihood of spotting such an incident before it gets to an unavoidable stage.

Maybe he wouldn't have noticed anyway. But is seems fairly likely to me that another 49 people just died so that controllers can have longer weekends.

UPDATE: I should also link to this over at Argghhh! again to place it in context with a pilot's eye view

Every so often, someone who thinks they're a wit sends me a copy of The Rules For Relationships According To Women. Unlike those rules, which might have been funny around the time Nefertiti was a debutante, these rules are real and they are not based upon caprice.

Very recently, I was walking through a grocery store parking lot and heard someone screaming on their cell phone, "It wasn't my fault! The broker told me not to make that payment, and then they didn't pay the loan off on time!" Which leads me to Rule Number One: It is YOUR responsibility to make all payments on time. Nobody else. Your name is on that contract, not theirs. Under text that says essentially, "I agree to repay this loan on these terms." When you are in the process of refinancing or selling, make it a point to keep paying that mortgage on time and in full. The worst thing that will happen is that you will get a check back a couple weeks later. Whereas if you blow the payment off, you are taking the risk, as happened to this person, that some incompetent person doing your new loan will not get the loan done in time to make the payment date. On the sixteenth, there's a penalty due. On the thirty-first day, it hits your credit, where it can conceivably make a difference of 150 points. And if the lender is getting ready to fund the loan the next day and runs your credit then and sees your drop, the terms of your loan just got worse, if they can fund the loan at all. It is the mark of a bad loan officer to tell you not to make your payments. A good one will specifically tell you to continue to make payments on time. I haven't blown a rate lock in a very long time, but there's always the possibility it might happen and the loan takes longer than I think it will. Don't let it happen to you. Make your payments on time, whatever you're doing.

Corollary to Rule Number One: You are responsible for getting it to them. All of this nice convenient stuff about mailing a check or sending the payment online is quite a convenience, but they do not legally have to do it. Your grandparents had to walk the check (or the money) in every month. You can still do this if your lender has branches and you suddenly remember on the 15th that you forgot to make your mortgage payment. Many lenders are very forgiving about this. But they don't have to be,

If that payment doesn't get made on time, it is your fault. End of discussion. If you mailed it off on time and it got lost in the mail, you are the one that owes the penalty. If you transferred the money online, and it somehow doesn't get credited to the right account, it is your fault. These don't happen often, but they do happen. The lenders are actually pretty forgiving about it, provided you can convince them that the payment was made. You have a receipt, a canceled check, something that says you made the payment in full and on time. If you're good enough about paying on time, sending the check on the first even though it's not officially late until the 16th, they're pretty forgiving about checks that get lost. On the other hand, if you are always paying on the last possible day, the lender is going to regard that late fee as the least they are due. While you are at it, always include something with your account number on it when you send the money. Write it on the check, include a coupon, put it in comments. Otherwise the lender could conceivably end up misapplying the funds of the check, especially if they figure to use the address on the check, and you're making a payment on another property. Most of the time they do get it right. But if they don't, it's your fault. If they get the payment with all of the necessary information and misapply it, that's their fault. If they didn't get it, on time or at all, or missing some important information, it's your fault.

There is no rule two, at least that I can think of right now. There is only one rule, but you violate it at your extreme disadvantage.

Caveat Emptor


Carnival of Liberty with a Jeopardy theme


They must be very close to nuclear weapons: Iran president rejects nuke suspension

Reuters had the same story, plus Ahmadinejad challenges Bush to TV debate, and Iran says no one can stop its atomic work.

Via neo-neocon

Ahmadinejad Says UN Action on Iran Stance `Unlikely'


Meanwhile, back at the proxy war, In war's dust, a new Arab 'lion' emerges

Is there anyone who doubts that by pressuring Israel to stop short of resolution one more time, europe has further enabled this nonsense?

Dr Sanity, just in case you had those doubts.

The Thomas Sowell article she references.


Bodies with torture marks found in Iraq

In a way, that this is headline news is evidence that Iraq is not yet in civil war. Sectarian and tribalist strife, yes. Civil war, no. Iraq is one of the more heavily ethnically fragmented nations in the region, and its various groups have major grievances against each other. Having had conversations on the subject with a couple of Iraqi co-workers in the past, who claimed Iraq was a modern unified nation while saying, "The Assyrians do this. The Kurds do that," has done nothing but reinforce the impression I got from the dry reading in places like the CIA factbook.

I would have been amazed had there been no ethnic and sectarian violence between the factions in this country. When the Sunni have used brutally repressive tactics for the last forty years to control the other ethnic and religious groups, and that weight is suddenly lifted, what does history tell you is going to happen? Consider what would have happened to the jews of europe had all of the libels to which they were subjected been true. What happened there was bad enough. But for the Sunnis, that stuff happened.

Iraq the Model on "options other than Democracy".

I'm with him. If the goal isn't democracy, it's not worth the work. Furthermore, there isn't another 2 to 4 years of the coalition in Iraq under the current conditions. The people who get bored when things go past half an hour and the people who quit when they find that task they were told was going to be long and difficult indeed turns out to have obstacles are making things progressively difficult, politically. A timetable is stupid; nonetheless one is in the process of being imposed politically. Which is a damned shame, because Iraq is far from the last task in the war on terrorism, or the war on radical islam, whichever you prefer to call it. I'll support the current efforts to the bitter end, but with all the people who have access to big microphones opposing the administration, the war effort has a de facto deadline due to absence of will.

Mind you, I won't be alone:

Indepundit notes that there are others who back the administration and will continue to do so.

Dean's World takes on Professor Chomsky.

Big Lizards on the NY Slimes slipping up and reporting that the Iraqi Army won big (as they usually do).

Victor Davis Hanson on the need to think ahead in the war on terror.

LGF on forced conversions, such as Centanni and Wiig.

Steven den Beste on disproportionate response.

One more observation before I quit this subject: Has anyone else noticed the parallels of the current situation within Islam to the political situation with Christianity in Europe (and North America) from roughly the beginning of the Renaissance to the Enlightenment? That breaking of the political stranglehold of the church? Is there anyone here who would have sided with the repressive wings of Christianity then? If not, then why would you side with the repressive wing of Islam? Christianity contains, at its heart, far gentler teachings and a far more tolerant worldview, and I say this as a decided non-christian. I think I would have genuinely liked Jesus, although not enough to become a follower. If someone gave me the opportunity to go back and strangle Mohammed in his crib, I'd probably have to take them up on it if they wouldn't allow a less bloodthirsty alternative. I say this despite the fact that it would probably have caused another bloodthirsty religion which started about fifteen years after Islam to erupt from the Arabian peninsula.


Obregon goes Al Gore one better: Mexico candidate rejects court decision

Andres Manuel Lopez Obrador likened the decision to a coup, saying the judges represented the interests of Mexico's ruling elite.

"We will never again allow an illegal and illegitimate government to be installed in our country," he told thousands of supporters camped out Mexico City's main plaza, the Zocalo.

Sound familiar?


Voters Everywhere Agree Political System "Badly Broken"

I believe that there is one move that will make more difference to that than anything else: Stop gerrymandering. Force political districts to be drawn based upon nothing else than equal population and shortest possible borders between districts. Yes, there would still be safe left wing districts and safe right wing districts. But there would be a lot fewer of them. Here in California, only 1 of the 120 seats in the state legislature has changed parties in the last two elections. As I remember, none of our 53 seats in the US House of representatives changed party affiliation last election. Our governor tried to change this (unwisely, in a special election) and got overridden by party activists on both sides.

But when there are fewer safe seats, everybody who isn't sitting in them has to appeal to the political center, not just the echo chamber on one side or the other.

The whole thing is enough to make this RINO want to re-run this picture for the benefit of the extremists on both sides.

Anchoress has her own thoughts on the matter.


Q and O catches Associated Press putting words in Donald Rumsfeld's mouth. Needless to say, it's not to make Rumsfeld or the administration of which he is a part look better.

While we're on the subject, neo-neocon notes that the media is entirely likely to fail to question even obvious fallacies put out by people it wants to believe.

Michelle Malkin has more.

Mary Katherine Ham on "Why we don't believe you"


HT to Mudville

for this Salt Lake Tribune story about a mother who complained of protesters and political opportunists endangering her son, whose son was killed by "insurgents" emboldened by their domestic politics. The world is watching. Just because you don't care what happens there doesn't mean they don't care what happens here.

My heart goes out to anyone in such a circumstance, whether they support the war or not. But it becomes far worse in such circumstances.

Hugh Hewitt has a letter on the same category.


via Tim Blair,

Orson Scott Card and the Church of Global Warming.


Armies of Liberation has noted that the Yemeni regime has arrested seventeen prominent opposition candidates.

While you're there, read about election violations


via Argghhh!, What WWII Army are you? I come out Poland at 94, followed by Finland at 88. Britain 81, US 63. I can live with that. Japan was my bottom correlation at 31.


Argghhh! has a good article on the likelihood of what happened in the ComAir crash in Kentucky. Let me add one more factor: Routine. You just think it's all same old-same old, and let your mind wander, and your number comes up. It's the deadliest factor there is.


via Instapundit, A defense of welfare reform. kausfiles comment is too good to ignore.

If a home for sale has a refrigerator included on the listing report, and the buyer's agent does not write that it goes to the seller in a contract, is the buyer actually entitled to the refrigerator. I am actually going through this right now.

The listing does not matter. What does the purchase contract say? That is the complete controlling fact of the whole entire transaction.

If the contract is silent, what matters most is whether the refrigerator in question is appurtenant to the land or not. Appurtenances are things which are physically and structurally attached to the land which is always the primary thing being sold in a real estate transaction. For a standard house, nobody would seriously argue that they have the right to remove it, because it is attached securely to the property. There are service pipes coming out of the ground attached to the ground and a foundation it is attached to. There are electrical service wires, telephone wires, and cable TV wires. All of which would come up if you pulled the house away. So the house is appurtenant to the land. This is how all real estate transactions are really structured, by the way. You are buying the land, and the house, if there is one, comes along because it's attached to that land.

So if the refrigerator is somehow built in, such that removal would be a nontrivial project, then it's appurtenant to the land. If all you have to do us unplug it and push it away on a dolly, that's not appurtenant, and there is no more reason why they should have to leave that than why they should have to leave their dog, cat, or child.

Now this is not to say that you can't build an excellent court case based upon the fact that there was an implicit promise made in the listing, and everything else in the contract was built off of what that listing said. Talk to an attorney for more information than I can ever give you on that score.

Even if they're not obligated, the seller might leave the refrigerator anyway. Maybe they've got another, maybe they are just living up to what they promised even though they might not be legally required to do so. Most people are mostly honorable.

In any of these cases, of course, the seller also can force you to go to court by being an obstinate donkey. It's not like you have the magic power of enforcing agreements. That power belongs solely to the executive branch, which will take no action in cases like this without a court order. Whatever the court says is final. Unless it's some $25,000 wonder fridge, however, it is not likely to be worth going to court over. Much cheaper to buy a new refrigerator, and your expected return on investment is much higher.

Caveat Emptor

Updated here

RINO Sightings

Carnival of Debt Reduction

Carnival of Real Estate

Carnival of the Capitalists


Now this is funny!: Al Gore: "Democracy is under attack"

"Democracy is under attack," Gore told an audience at the Edinburgh International Television Festival. "Democracy as a system for self-governance is facing more serious challenges now than it has faced for a long time.

"Democracy is a conversation, and the most important role of the media is to facilitate that conversation of democracy. Now the conversation is more controlled, it is more centralized."

He said that in many countries, media control was being consolidated in the hands of a few businesspeople or politicians.

1) It's hurts when there are media out there that don't necessarily subscribe to the "left wing: good, right wing: bad" simplification. Especially to those politicans, such as yourself, who depend upon friendly media controlling the national conversation.

2) I thought you claimed to have invented the internet? Haven't you heard of blogs? If dissent is being crushed by the regime, there are several places on my sitelist that haven't gotten the message.

Actually, I can't wait for the next network that figures out there's more money in being a centrist than in being kneejerk leftists.

Some of my earliest memories are of the San Diego Zoo. I caught my love of animals from my father, and we visited frequently from the time when I was very young. Evidently, somewhere in the family archives is a picture of me riding a Galapagos Tortoise in the Children's Zoo in the very early sixties. I remember feeding many of the animals there back when you were still allowed to, something I'm sorry my girls are likely to miss out on. The elephants would congregate, and back then they kept a fairly large herd of at least a dozen at the zoo, not the three or four that are there now. The Sun Bears loved applas and oranges. I understand why that changed and would not go back to those days, but the memories are special. Indeed, when my father suddenly died four years ago, the zoo was the place where I wanted to go. He, of all people, would have understood why: It was where my strongest, and most of my fondest, memories of him were. Even though the number of exhibits has diminished, the quality has increased. Hilda can sit and watch the Siamangs and Orangutans at Absolutely Apes for as long as we let her, and even though there are occasional misses like Tiger River (the tigers are usually in a location where all you can see are the tips of their ears), their successes have been many. I happily visit anytime I can spare the time.

The same is not true, unfortunately, of the Wild Animal Park. While our membership allows us to visit there just as it does the zoo itself, we don't go very often and it isn't just because of the drive. Now, we are very aware that the important part of what goes on there is CRES and the Veterinary Center, and the tourists who pay the bills are just an afterthought. Nonetheless, while we go once or twice per year, of late we are increasingly disappointed with the Wild Animal Park.

One of the things is the fact that they make it difficult to see the animals. Aside from Condor Ridge and Lion Camp, the place is just not constructed for people to view the animals. I don't want to go down Heart of Africa trail because it all seems just an excuse to get us to the lunch stand at the end of it, and then you've got to slog back up, having seen it already that day. There just aren't that many animal enclosures along it - the Okapi and Gerenuk exhibits are the only reasonably decent ones, and they're near the beginning. Oh, and if you go all the way to the bottom, you can maybe feed the giraffes if you buy an acacia leaf at $2 per.

The latest insult is the truncation of the tram tour. It used to be an hour long, cover about 5 miles, and go basically around all of the exhibits. Unfortunately, about the time you started really getting a chance to observe the happenings, they're off an running for the next stop on the tour. And now they've cut it by about forty percent, lopping off a lot of the most interesting exhibits to me (I like the Goral and Serow, and really used to like the Mountain Goat exhibit before they took the North American ones out and put the others in, I always looked forward to the eurasian waterhole, and others). I understand the trams are getting old. But one suggestion that keeps getting ignored - far less expesive than updating the trams, I might add - is simply a paved pedestrian path with very occasional water fountains and outhouses. I would much prefer to walk the perimeter, old and fat as I am, if it meant I could view the park at my own pace, instead of being swept off when the guide is done saying their eight or nine sentences at a particular spot. Of course, this doesn't sell kid's meals, but we bring our own picnic anyway. And, I suspect, most of the folks would stay with the tram. Indeed, the Kilimanjaro Nature trail is the most deserted area of the park (You don't know what you're missing; not only the lion and tiger exhibits among others, but a lot of native stuff too). That's fine; they are welcome to do the tourist thing their way. I want to have the ability to do it mine, and take the time to show the girls the way the animals interact and have the leisure to watch a sequence play out rather than being swept off with the tram. Indeed, I don't see why they can't use the tram route for most of it. If there's another way to the Black Rhinos or the Bonobos, both of which would be easy walks for most folks, I haven't discovered it.

Now, our favorite time of year to go is the last couple weeks of the yearly Park at Dark. The park normally closes sufficiently before dusk as to miss the animal activity that naturally occurs then. But for about two months a year, it stays open later. Mind you, they're trying to show off the this and that back at the Village (and sell kids meals), and the back trails get closed off at dusk, but still it gives you an excellent opportunity to watch the animals throw off the torpor of mid-day for some activity at the end of afternoon and beginning of evening. Which last rant was, I suppose, an excuse to post some links to pictures I took yesterday.

Crane and Chicks


Chilean Flamingo turning its egg

dik-dik. They have these right inside Nairobi Village. Some people were saying "baby deer!" "Nope, that's as big as they get!" They're probably half again the size of the Chevrotain, or Mouse Deer, but still small.

Blue Macaw, one of probably two dozen macaws the zoo keeps. The daily flight back to their night quarters at the zoo is impressive, but this one was just monopolizing the food tray

A pretty little seed eater in Hidden Jungle whose species name I cannot remember.Two Andean Cock-Of The Rock impressively colored birds. From how the population has grown, I gather the problem is how to keep them from breeding.

A gibbon swinging towards us. Series of three photos one two three (notice how the resolution improves. It's a fair size cage)

Three pictures of the girls doing one of the occasionally obligatory tourist things, Lorikeet Landing. one, two, and three. Hilda was nervous, but mostly got over it. Little Ramona wanted nothing to do with them.

From the tram, White Tiger. Assuming it's the same one they've had, she was seized from smugglers about 12 years ago. They tried her as an animal ambassador briefly, but it didn't work out. She is gorgeous, though! Slightly different view.

Probably the best view of a male asian elephant I've ever seen. A couple of females dusting themselves. female african elephant on the other side of the tracks.

Obligatory false pr0n bait: Look at that rack! (of antlers.)

Prezwalski's Horses

Ibex, one of their real breeding program successes.

Rhinos at the goodie truck. For about $75, you can go on these photo caravans to meet the animals up close and personal, feed them, and take pictures to your heart's content. The animals (all herbivores) swarm around. Maybe when the girls are older, we'll do it. A slightly different view. They got into a small tiff over some slight or other.

Some Armenian Sheep

Minions of Sauron, er, oryx. Joking aside, another successful breeding program. They're getting ready to send some back into the wild.

This buck was looking for the ladies

California Mule Deer. Outside the fence, of course. Visits to the Wild Animal Park aren't complete if you haven't seen at least half a dozen California Freeloaders.

A couple of RINOs rhinos expressing their true feelings about extremists. A couple more at the watering hole.

Rhino Mom and her 800 pound baby. just the baby. Yes, those are deer in the backgrounds of both pictures, I don't remember the species.

Off the tram now, taking a sunset stroll up to Condor Ridge. the old lion enclosure, and a panorama taken right after. You can see the lion beneath the wire human holder and above the rock, if you look closely.

A Harris Hawk, native to the area but in captivity. Just a good picture at sunset.

Porcupine in a tree. I don't know why, but I always think that's interesting. Maybe because I don't think of porcupines as being big tree climbers.

The condors themselves were done for the day, off on the other side of the rocks, but the Bighorn Sheep were quite active. This one was trying to climb a chainlink fence, obviously patched and reinforced, for some tree greenery.

That was all the ones worth sharing. Once it gets dark, you're mostly restricted to Nairobi Village, which they fill with tourist stuff. We come to watch animals, and we left when that was essentially impossible.

Diagnostic Dyes May Put Patients at Risk


The special interests are swarming already: Study: Teacher's gender affects learning.

It's been peer reviewed and accepted, according to the article. But not accepted by advocacy groups, obviosly.


Hurray! Fox News crew freed after Gaza ordeal

Michelle Malkin notes that they were forced to convert to Islam, among doing other things, at gunpoint.

Islam does not acknowledge compulsion as an excuse for false conversion. Under Islamic law, the words are the words, and cannot be unsaid or taken back under any circumstances. According to their own lights, the Islamists have given themselves license to deal with Centanni and Wiig if they ever forswear Islam. The punishment for apostasy is death, in case you have forgotten. It also gives islamic religious leaders the right to emplace a fatwa upon them for failure to hew to the religious line. All in all, one more impressive propaganda victory for the Islamists.


Don Surber has thought of a political judo blow that would devastate Iran. I don't know that I agree it would be sufficient to defuse the crisis, but it would certainly hurt him with Islamists.

Yet another reason to worry about Iran: Iran test-fires sub-to-surface missile.

Original story here, as Yahoo! links are notoriously impermanent.

Captain's Quarters notes the importance of the Iranians new heavy water facility.

Via Argghhh!, a very interesting deconstruction of one person's political priorities at Caerdroia. I've long suspected some on the left of this, but the subject of this deconstruction is the first one I can remember to come out and proclaim it.


Professor Bainbridge on Elliot Spitzer.

I mostly agree.


On Plame, Captain's Quarters has the last post I hope I ever need to read on it. What an (expletive) waste. Over literally nothing.

I just moved into a rental house with an option to buy. I figure I can probably save up around $40-45k for a down payment in three years. how should i save? The Roth IRA tax loophole for first time home buyers maxes out at $10k and takes 5 years anyway. It sounds dumb, but the best safe short term investment I can think of is savings bonds. There has to be something better!

Your major constraints here are a relatively short time frame and you want a certain amount of safety. The idea of investing the money is that you want to get more money, not lose your investment savings.

So if you're going to move outside the realm of guaranteed investments for this purpose, you are going to worship at the altar of diversification. Stocks generally go up, but can go down (roughly 28 percent of all years since records have been kept), and indeed, are not anything like a panacea. Therefore, if you're going to risk the stock market or the bond market in order to obtain their higher returns, you're going to want to diversify, diversify, diversify in order to prevent anything short of a general market decline from ruining your investment.

With that firmly in mind, individual stocks are probably not a good idea. If successful, the idea is that the income will be mostly capital gains, which are taxed at a lower rate. Unfortunately for this idea, it's hard to get efficient and diversified individual stock investment for less than $100k. At $100,000, you've got a down payment to be extremely proud of.

The same with individual bonds to an even greater extent. When most bonds run in $10,000 to $50,000 denominations, diversifying is not really an option when you're just trying to save up for a down payment. If one of your bonds suffered a significant downgrade, bond price would take a hit, and therefore a very large part of your investment would suffer a setback.

Next on the list is government savings bonds and bank CDs. These offer a guaranteed return. The problems are that it's a mediocre return at best, and it's all ordinary income. Still, 5.5% or so for bank CDs is safe and secure, even if it reduces to about 4% after taxes. US Treasury securities have a four year minimum holding period to get their guarantee. Me? I stopped loaning the government money twenty years ago.

All of the various insurance products are a bad idea. You're saving for something you want within five years, not something forty years away or trying to insure a possible loss. Nor does the tax treatment help. Secure commodities investment is one of those oxymorons.

Finally, there are mutual funds. These are diversified by their very nature. In fact, my usual complaint is that they are too diversified, but in this case, that's actually good. Pick a good fund family that covers all of the major asset classes, including bonds. Yes, you pay management fees (and advisement fees or a sales loan if you are smart to help keep you from over-reacting to short term market events), but you can average nine to 13 percent per year, pretax, seven to ten afterward. A large portion of gains will be capital gains, taxed at lower rates than ordinary income. This isn't a certain or guaranteed investment, and can lose some of your principal, even all of it in theory. Nonetheless if you're comfortable taking what is in my estimation a small amount of risk, it can really pay off.

Caveat Emptor


Israel adds third leg of strategic triad. Two nuclear launch capable submarines.

It would deter anybody vaguely rational. Unfortunately, that doesn't describe the Iranian regime.

Also, Iran has 1.6 million square kilometers of territory. (source) while Israel has 20,330 (source)

One bomb does for the entire country of Israel, or at least its populated heartland. Iran would require dozens, if not hundreds, and the mullahs would believe they're going to paradise for the murder of millions.

Can anybody think of a suitable deterrent against the imams?

That's why they can't be allowed to have nukes.

And therefore, I'm happy about this: West likely to reject Iran's response

The U.S. State Department has said that Iran considered its proposal to be a serious one and promised to review it, as did the five other nations that offered political and economic rewards to Tehran July 1 if it agreed to a freeze enrichment.

But the diplomats suggested that despite assurances of a serious review, the capitals involved found little of substance in the document.

One of them said that much of the Iranian response, delivered Tuesday, confines itself to "a history of Iran's nuclear program from Tehran's point of view," including arguments that enrichment was its right under the Nuclear Nonproliferation Treaty.

On the other hand,

If IAEA chief Mohamed ElBaradei's report finds that enrichment is continuing, as expected, the council is then likely to move toward economic and political sanctions.

(sarcasm on) I'm certain Khameini and Ahmedinejad are shaking in fear. (sarcasm off)


New Homes Slump Worsens

On the other hand, if you read between the lines, buyers will never have more power than they do right now.

If you insist on being able to sell in six months for $50,000 net profit, go away for the next five years at least. I really do not even want to talk to flippers right now. But if you're willing to look and bargain and fix, you will do very well out of the current market, particularly if you can wait until it turns. It might start to turn next spring. It may not be until Spring of 2009. But if you wait until prices are rising again, you will miss the best bargains. Once prices start rising again, people will come out of the woodwork, and buyers will no longer have the power they do now.

Yes, it's a risk. But economic reality time: those who take the risks make the big bucks.

WSJ saying what I was saying a year ago and more. this article I wrote in February is the closest thing to an encapsulation, and I wrote it as a looking back sort of thing.

It could be bad for quite a while. But those who have the guts to get off the sidelines with sustainable investment will do extremely well for themselves.


Pluto loses status as a planet. From promoting three to demoting poor Pluto, that's the difference between the prroposal and the final adoption.


U.S. air marshals to go native

Finally, after being five years, they're allowed to dress to blend in with the other passengers, instead of wearing attire that says, "kill me first!"


Oh my! It looks like Judge Anna Diggs Taylor should have recused herself.

In other war news, Michael Barone reviews The Path to 9/11 by ABC news, of all folks. Not exactly the strongest supporters of the Administration. I intend to watch it when it airs (I have to watch 10 hours of TV per year).

Victor Davis Hanson also has some clear thinking.

LGF has a clip of the investigation of whether Israel used chemical or biological weapons. Nope. As if you really needed to ask.

via several places, Zombietime rebuts the claim that that Israel targeted Red Cross Ambulances in Lebanon.


Scrappleface on the virtues (?) of placing too much weight on polls. I don't know where we got the idea that facts or intelligence or reasoning are popularity contests, but we need to stop propagating it.

Okay, I did an article called Why Renting Really Is For Suckers (And What To Do About It). Fairness demands that I do a companion article on situations where buying is not a good idea.

There actually are some. First off, the math just plain works against it for less than about three years. If you know you're going to have to relocate in less than three years, chances are you shouldn't buy. This is not to say that professional speculators are stupid, just that they are playing with different assumptions than most of is. If one victim isn't desperate enough to sell for thirty percent under the general market, they'll go find someone who is. But they don't buy for a place to live. They're buying with a professional eye towards making a profit, and quite often, they don't. If your situation is that you're looking for a home to live in, and you're going to have to sell it instead of renting it out after less than three years, chances are you shouldn't buy. In this instance, it's not the idea of being a property owner in general that is the major factor in the decision, it's how long you're going to own that property.

This is not to say that nobody has ever made money buying for less than three years. The just concluded seller's market right here in California is the counterexample to that contention. But real estate appreciation happens when it happens, and you never know until afterward what it was. If people could predict the market with that much certainty, then it would make sense to try and time the market. They can't, and it doesn't, at least not for the ordinary person.

You shouldn't buy if you can't get a sustainable loan that you can afford. If you don't have at least three years of a fixed rate on an amortizing loan you can afford, you should probably not buy. The market returns 5 to 7 percent per year on average. That is a very different thing than five to seven percent every year. Some years are plus twenty. Other years, like this one is likely to end up, are minus twenty. If you have a sustainable, affordable loan, you'll pay some principal down and you should be able to refinance when the adjustment hits. This doesn't apply with negative amortization, interest only, or shorter term loans. Particularly if there's a prepayment penalty, you'll likely eat up all the principal payments you made with that prepayment penalty. Now suppose you got caught in a twenty percent down year? Over longer periods of time, things even out, trending towards the average return of 5 to 7 percent per year. But that's no comfort whatsoever to those people who bought into unsustainable loans on overinflated properties in the last two years and are now facing huge problems because they can't sell for what they owe, and they can't refinance into a payment they can make. I didn't do it to anyone; I could have made a lot more money if I was so willing. But that doesn't mean there aren't a lot of them out there.

The market is unpredictable. All I can tell you for sure is that it's still declining right now and the next upturn might not come for several years. The only time the value of your property is important is when you sell or when you refinance, but if you haven't got a stable loan, you're looking at a mandatory time when your value is important. If you can't last until then, the eventual market upswing will be of no comfort. Eventually, I'm confident you'll make a better profit than you could anywhere else. But eventually can be quite a while, and if your time constraints don't stretch far enough, that's a problem. A big problem.

Third group of people who shouldn't buy is those without a sufficiently stable income, particularly if their available cash isn't enough to smooth out the bumps. If you need $6000 per month, and you make $24,000 in one whack about every four months, that might appear to be enough, but consider what happens if for some reason it is six months between paychecks? Once you're a couple of months behind and your credit score is toast, it doesn't make that go away if your next check after that is only two more months.

I think I've been clear enough on the evils of buying too much house for your income. People should not overstretch financially to buy a home, but the majority do. You get a month behind on rent, and it is a problem, but if you get a month behind on your mortgage, that's part of your credit score for ten years, and puts you in a whole different class of borrower for two. Plus you're likely to be behind on your next month, and the one after that. This is a lot less of a black mark for renters than it is for owners with a mortgage. Then when you're ready and can otherwise really afford a mortgage, you can't get one or you can only get one on prohibitive terms. So save up enough to smooth out the bumps, and it certainly doesn't hurt to have a down payment also, as that will make the hurdles you have to get over with irregular paychecks that much lower.

That's basically it. If you think you have another one, I'm interested in it, but those are the only three I can think of. The mathematics and economics do generally favor home ownership, even without that generous tax allowance given for the interest deduction and state property taxes, but there are cases where the general rules get overridden. Contrary to what many people were saying not too long ago, you can lose money in real estate, as the fact that property values locally are down about 20 percent from peak should attest. You can also become financially crippled for years. Nonetheless, if you take care to keep it within the realm of what you can afford, and what you can afford to make payments on indefinitely, then the worst that is likely to happen is that you'll owe more than the property is theoretically worth for a while. If you don't need to refinance or sell during that period, that's just unimportant. In cycles stretching back hundreds of years, real estate has always come back to higher prices than before, even accounting for inflation. The critical thing is to make certain you can wait it out.

Caveat Emptor


RINO Sightings

Carnival of Real Estate

Carnival of Capitalists

Carnival of Personal Finance

Carnival of Investing


Via Environmental Republican, How to negotiate with terrorists

Any questions?


Fed Official states willingness to drive stake into heart of economy. Stocks drop, of course. Duh. Too bad Bush only has a couple of appointments left. Were I in his shoes, I'd summon the Board of Governors for a serious talk about easing up on the inflation fears. Maybe threaten to appoint real estate people to the remaining vacancies in my term. If that doesn't put the fear of disaster in them and cause them to back off a bit, nothing will. Yes, bankers are always supremely paranoid about inflation. But there are limits.


Pigilito has an interesting bit about the political environment for nuclear power plants.


Argghhh! notes that Congress doesn't have $7 million to pay for soldier's head injury treatment, but does have $160 million to pay for credit monitoring services that anyone can get for free.

Makes me want to ask how I can embarrass the government into giving me $160 million. It's not like they care where it's coming from, or what better places it could go. I could pledge $70 million to the head injury treatment center and everybody would come out ahead. Except of course the other taxpayers. Get your own scam!

(Better yet, if you're a citizen instead of a dead weight, support porkbusters.)


Michelle Malkin is focusing the spotlight upon a couple of Fox journalists where there has been remarkably little coverage.

Iran Ready for "serious" talks.

It took them three months to say that? After three years of what the appeasement artists solemnly declared were serious talks?

At least there is one rational voice on the issue:

At U.N. headquarters in New York, U.S. Ambassador John Bolton said the United States is prepared to quickly submit elements of a new Security Council resolution that would impose economic sanctions on Iran if it does not accept "the very, very generous offer" from the five permanent council members and Germany.

I understand our options are limited, especially with the domestic political situation. Nonetheless, I'd rather have our president do the intelligent, principled thing, even if it causes the Republicans to lose Congress in November. I don't think it will, but it could.

I cannot bring myself to wish ill on Howard Dean or any of the other Donkey honchos. But I wouldn't cry if they suddenly saw the error of their ways and discovered a certain burning ambition to enter a different trade.

On the same subject,

It turned away International Atomic Energy Agency inspectors from an underground site meant to shelter its uranium enrichment program from attack and its top leader, Ayatollah Ali Khamenei, declared that Tehran will continue to pursue its nuclear activities.

If there is anyone who still thinks that if a sufficiently strong response is not forthcoming in the next few months, we're going to entering a phase of history where fanatical religious leaders with attitudes that hardened in the eighth century AD have nuclear weaponry to intimidate the rest of the world with? Ladies and gentlemen, this scenario makes North Korea having nukes look positively wonderful by comparison. Kim Jong Il won't start the world's first nuclear war because he thinks Allah has told him he'll get seventy-two virgins in paradise. I don't want a confrontation with Iran. But the worst possible case if we stop them from getting nukes is better than the best possible case if we don't.

ROFASix agrees with me that ultimately, this is another problem that the US will be expected to solve.

RightWing NutHouse notes some existing Iranian plans. Doubtless we have plans for Iran, as well. Under the circumstances, it would be criminally stupid not to have made contingency plans for war with Iran. We've got such a plan for war with Canada, for crying out loud, and have since 1934. It's not like you can suddenly gather intelligence, figure out what are and are not important targets, figure what it would take to achieve them, put the logistics in place, and figure out all of the coordination, after the shooting starts. Well, I suppose you could if you wanted to lose and waste resources. Isn't that the sort of thing the president's enemies have been riding him for?

Thomas Sowell at Real Clear Politics

After we, or our children and grandchildren, find ourselves living at the mercy of people with no mercy, what will future generations think of us, that we let this happen because we wanted to placate "world opinion" by not acting "unilaterally"?

While we're on the subject, Michael Barone on out covert enemies.

Legally, immediately.

With that said, there are economic reasons why it may not be a good idea for you to refinance.

If you have a prepayment penalty, you're going to have to save a lot of money to make it worth paying that penalty. Suppose you have a rate of 7 percent, and an penalty of eighty percent of six months interest, that's a prepayment penalty of 2.8 percent of the loan amount. So, in order to make it worth refinancing in that instance, you have to save at least 2.8 percent of your loan amount in addition to the costs of getting the loan done, all before the prepayment penalty would have expired anyway. So if it's a three year prepayment penalty, you have to cut almost a full percent off your rate just to balance out the prepayment penalty. The higher the rate you've got now, the bigger the penalty and the more you've got to save in order to make it worthwhile. On the other side of the argument, the longer the prepayment penalty is for, the easier it is to save enough to justify paying it. If you've got a five year prepayment penalty, you're likely to get transferred or need to sell or somehow end up paying it anyway.

Second, your home has not appreciated yet, especially not in the current market. You bought for $X, and your home is still worth $X, and you haven't paid the loan down much yet, so your equity situation is essentially unchanged. In fact, since relatively few loans are zero cost, you're either going to have to put money to the deal or accept a higher rate than you might otherwise get. Don't get me wrong; Zero Cost Refinancing is a really good idea if you refinance often. But when you go from a loan that takes money to buy the rate down to a loan where the lender is paying for all of the costs of getting it done, you're not going to get as good of a rate unless the rates are falling. As of right now, they have been going through a broad and more or less steady increase for the last two years. If you or someone else paid two points to get the rate on your current loan, you are not getting those two points back if you refinance. They are sunk costs, gone forever when you let the lender off the hook. If rates had been going down for the same amount of time, it might be a good idea to refinance, but that is not the case right now.

If you got your current loan based upon a property value of $400,000 and total loans of $380,000, that's a 95 percent Loan to Value Ratio. So your property is still worth $400,000, you've only paid the loan down $400. That's still a ninety five percent Loan to Value Ratio; more actually, as doing most loans is not free. So unless your credit score has gone way up, you can now prove you make money where you couldn't before, or you have a large chunk of cash you intend to put to the loan, chances are not good that refinancing is going to help you. If your credit score has gone from 520 to 640, on the other hand, or you now have two years of tax returns that prove your income, or you did win $100,000 in Vegas and you want to pay your loan down, then it can become worthwhile to refinance, even in a market like this one where the rates are generally rising. Unfortunately for loan officers like me, that does not describe the situation most people find themselves in.

One more thing that can influence whether it's a good idea to refinance is your rental and mortgage payment history. If when you got your current loan, you had multiple sixty day lates on your credit within the past two years, and now they are all more than two years in the past, that can make a really positive difference in the rate you qualify for. On the other hand, if you had an immaculate history before and now you've had a bunch of payments late thirty days or more, then it's probably not going to be beneficial to refinance.

Cash out refinancing is one thing many people ask about surprisingly soon after they close on their home. Now if you have a down payment, tt's better to put aside some of the down payment for use in renovations rather than to initially put it towards a purchase and then refinance it out, as it saves you the costs of doing a new loan. If the equity is there and if you have the discipline to take the money and actually do something financially beneficial with it, it can be a very good idea. If you're just taking the money to pay off debts so you can cut your payments and run up more debts, it's probably not a good idea, even if your equity situation supports getting the cash out. It often can and does in a rising market. In the current market where values are retreating, not so much. If you bought any time in the last two years, it is unlikely that you have significantly more equity now than when you bought, making the whole situation unlikely to be of benefit.

A lot of situations have something or other that makes them an exception to the general rules of thumb. The only way to know for certain if the general rules apply to your situation is have a good conversation with a loan provider or two.

Caveat Emptor


On a regular basis, I get emails that ask me what I think of a particular company. When I check out public forums, I see questions about particular companies every time. "What do you think of X Realty, or Y Mortgage?"

Reputation has a certain value of course, but in my experience, these people are overvaluing reputation. These people are looking for a "silver bullet" solution to their situation that lets them , and there aren't any. They want to be taken care of without doing the mental work of figuring out whether the person is really doing a good job. "This is a great company, and great company would never take advantage of me, so I must be getting a great bargain!"

This utterly leaves aside any number of issues. Suppose the Mortgage Firm of Dewey, Cheatham, and Howe were paying me a fee for every referral. Most people might have justifiable concerns about whether my recommendation was motivated by that fee or by the desire to get them a great loan. Well if you're chumming for a recommendation, you have no idea if the anonymous person recommending the firm of Dewey, Cheatham, and Howe is a virtuous benefactor - or one of their loan officers. The bigger the firm, the more loan officers they have. Huge National Megacorporation can have hundreds of their loan officers log on to the website anonymously and all endorse National Megacorporations loan programs for some mysterious reason. Suppose the person isn't affiliated with Dewey, Cheatham, and Howe, but does work for a similar firm. They could be trying to build demand for the same sort of operation that feeds them, so when people read about Dewey, Cheatham, and Howe's methods being recommended, and then encounter this similar firm, they are ready to do business.

Suppose the person answering is a complete babe in the woods? They just plain have no idea. They've never gotten a loan, or if they have, they got took just as badly as anyone else in the history of the world, and worse than most. Does the possibility of such a anonymous recommendation for the Mortgage firm of Dewey, Cheatham, and Howe seem like a thing you want to follow? Unless you audit that person's transaction and compare it to other similar transactions going on at the same time, you have no real idea whether this person would recognize a scam if it bit them. Even if you do audit their transaction, that doesn't necessarily mean anything, good or bad, for your situation.

Suppose the reason they thought Dewey, Cheatham, and Howe did a good job was because they didn't pay attention. They've read every single one of my articles, and they understand all of the things that could go wrong, and they actually know how to read a HUD 1 form, but they just didn't bother because their Uncle Joe works for Dewey, Cheatham, and Howe, and they trust Uncle Joe completely, and Uncle Joe would never take advantage of them. This ignores the issue that Uncle Joe is unlikely to be your loan officer, and even if he was, Uncle Joe may have compunctions about his family that do not apply to you. Furthermore, a very large fraction of the most unethical stuff I've seen since I've been in this business was Uncle Joe (or Brother Moe, or Sister Sue, or Cousin Lu) raking people over the coals who they knew would not shop around for a better deal. But even if they are completely unrelated, they decided to trust Joe, and didn't do the diligence that would have told them whether Joe was doing a good job, let alone the best possible job.

Now in both the loan and in the real estate business, service is provided by individuals, not companies. It's the guy you're sitting down talking to right here that decides how much of a margin they are going to work on, not some mysterious exalted Chief Operating Officer in New York City. That COO may lay out base requirements that say "no more than X, no less than Y", but it's the person doing your loan, or the agent doing your transaction, that decides where in that spectrum you fall. And I shouldn't have to point out that if they say "The corporate president says we have to make at least two points on every loan!" and somebody else offers you a better loan for you, that's their problem, not yours. They are not getting, or at least they should not get your business if you know of a better possibility. You don't owe anyone your business.

Finally, every situation is unique. People ask me what I think of a particular lender, and I'm thinking about the clients they'll do well with, or the clients where that particular lender's programs are most competitive. The lender with the best thirty year fixed rate mortgage in the business is not a lender I would use for an 80/20 short term piggyback on someone with a 600 credit score. That particular lender doesn't want to touch 100 percent financing, and refuses to do business at all with anyone whose credit score is less than 620. The lender I'd most likely use for the latter borrower has a rate and cost tradeoff for their loans that knocks them completely out of contention for the A paper full documentation 80 percent LTV thirty year fixed rate loan with no prepayment penalty. They're not competitive for that borrower, and both that account executive and I know it. They'd be grateful to me for placing the loan with them, and they'd certainly get it done, but my wholesalers and I have an understanding: The lender who has a program that can deliver the lowest rate cost tradeoff on the best terms for the client gets the business. They don't want to compete on price, but a good loan officer forces them to do precisely that. And if the wholesaler is one of those who refuses to compete on the basis I want them to compete on, there are plenty who will. Don't BS me about service. Everybody should have great service. If you don't have great service, we're not meant for each other, and the lenders I already do business with all have great service. What I want is a great loan for this client that you can actually deliver on time. If you've got that, we may have some business. If you haven't got that, we don't. This point, incidentally, is one of the reasons you'll end up with a better loan from a good brokerage than you will from the best lender. A broker knows how to shop loans better than any ordinary consumer.

This isn't to say you should just trust a broker. Indeed, my point is that you shouldn't trust anyone. Shop around, compare what's available, ask them what for written guarantees, verify everything, and don't give them your dollars to hold hostage until they've actually delivered. That's why I put out the yardsticks for measuring performance I do, that's why I give you the strategies for finding the people who will do a better job, and for forcing them to actually do a better job. You can't know if something is a good bargain except by comparison with something else like it, or several somethings. Given the amount of legal wiggle room there is, unless you pin a loan officer or real estate agent down with specific guarantees and conditions in writing, what they actually deliver is completely dependent upon their good will. If they have good will, you don't need to work nearly so hard, although comparison shopping would still be a really good idea. But if a decent proportion of agents and loan officers had goodwill, there would be a lot fewer problems with the industry.

Caveat Emptor


Interesting. I just checked my server stats for top referers, and evidently, this site got 1300 plus referrals from disney .com. Thank you!


Lebanon Warns Against Inciting Israel

Lebanon's defense minister said Sunday he is certain Hezbollah will not break the cease-fire but warned all militant groups of harsh measures and a traitor's fate if they incite Israeli retaliation by firing rockets into the Jewish state.

No, Hezbollah would never incite Israel by shooting rockets into Israel, shooting at civilians, kidnapping soldiers, engaging in suicide attacks, or anything like that. That would be unprecedented. Must be those other militants over yonder.

Israeli Foreign Ministry spokesman Mark Regev said Saturday's raid was aimed at disrupting arms shipments to Hezbollah and such operations may continue until international peacekeepers arrive to enforce an arms embargo.

"In the situation where there was a flagrant violation of the embargo, Israel had the right to act. Had there not been a violation, Israel would not have to respond," he said Sunday, expressing impatience with the slow international response in offering troops for the peacekeeping force

One word: hudna. Another: taqiyya.

Iran-Hezbollah missile gift blocked, officials say

"The United States blocked an Iranian cargo plane's flight to Syria last month after intelligence analysts concluded it was carrying sophisticated missiles and launchers to resupply Hezbollah in southern Lebanon, two U.S. intelligence officials say.

No, Hezbollah isn't Iran's catspaw, and Israel isn't a US ally. Not at all.


Iran cartoon show mocks Holocaust

Let's get this straight. They condemn the exceedingly mild Danish cartoons about Islam, then go out and go over the top with such things as Ariel Sharon, the incapacitated former Israeli Prime Minister, wearing an SS uniform, or a man with Jewish side locks is depicted as a vampire drinking from a container marked 'Palestinian blood'.

Lest I be mistaken, I think they're in bad taste, but don't think any sanction should apply to people who draw or disseminate such things. That's part of freedom of speech. On the other hand, they pointedly are not in any position to request anyone not to make fun of their particular superstitions.


Armies of Liberation notes a fatwa against female candidates in Yemen.


Via LGF, a Ben Stein column from the New York Times:Looking for the Will Beyond the Battlefield.

In case you are not familiar, this is a significant part of what killed the Roman Empire.


Wizbang has a humorous article on the current impeachment fad, popular on the political left.

Yesterday I dealt with a very disturbing phone call from a would be client. He was very happy with the way I found bargain properties, and wanted me to find him such a property. All very well and good. But he said that a condition of the transaction had to be that he would receive cash back from the seller in order to rehabilitate the property while financing the entire amount. This is not so good.

I am well aware there are all kinds of self-proclaimed real estate gurus out there, many of whom push precisely this sort of strategy. That does not change the fact that it is *FRAUD*.

The lender evaluates a property based upon accounting principles, which is to say Lesser of Cost or Market. Whichever is less, the cost of the property or the market value. Market value is measured by the appraisal. It's not perfect, and it's not foolproof, but it's the best thing there is. Cost is measured by purchase price - the price at which a willing buyer and a willing seller exchanged the property. It has to be worth that much or the buyer would not have been willing to pay it, would they? It can't be worth more or the seller wouldn't have sold, would they?

Manipulating either purchase price or appraised value for financial purposes such as justifying a higher loan amount is fraud. Since there is no other rational reason to do that, it's pretty universal that manipulating appraisal value or purchase price is fraud.

Many people have all kinds of rationalizations why doing this sort of thing is permissible. "Real Estate goes up in value," "It'll be worth that much eventually," and "It'll be worth that after the renovations!" being very common. None of these addresses that fact that that's not the situation now, and the lender is lending based upon the value now, not later.

The purchase price, in particular, is the purchase price because that it how much money the buyer is paying and how much money the seller is receiving. But if the purchase price is $400,000 but the seller is returning $20,000 to the buyer, then the real purchase price is not $400,000, is it? The seller is only getting $380,000, and the buyer is only paying $380,000. If it was a cash transaction with no loan involved, there would be no doubt. If I hand you $400,000 and you hand me back $20,000, I've only given you $380,000, not $400,000, and there's no doubt about it. You've only got $380,000. Only the fact that there is a lender in the middle of most transactions gives any leeway to confuse the issue, and if you're hiding something about a transaction in order to induce some other party to perform a financial action they would not otherwise, that is a textbook definition of fraud.

Lest there be any mistake, you do have to hide it. If the terms of the purchase contract state that there will be this rebate, the lender will treat the purchase price as $380,000, and underwrite the loan based upon a $380,000 purchase price. Telling the entire truth defeats the possibility of it working, and once you have neglected to inform the lender of this significant fact, you are committing fraud.

Some people will cite the example of Seller Paid Closing Costs as justification for this, but that is an entirely different matter. Indeed, traditionally lenders treated seller paid closing costs, over and above the seller's usual share, as reducing the purchase price. It is only the last few years, when it has been pointed out that everything about real estate transactions is negotiable, and that the seller must have been willing to pay those costs in order to consummate that transaction, that the lenders began to allow it. But it is to be noted that all of that money is going to third parties, people who are being paid for their services in making the transaction happen, none back from the seller to the buyer.

Consider instead this scenario: Jim and Joe trade the stock of corporation A. The public sale price of that stock is $100 per share, but as soon as Jim has Joe's money, he quietly hands Joe back $20. The price Joe is paying Jim for the stock is $80, but to the observer unaware of the side transaction, it's $100. It's going to appear to the general public that both Jim and Joe consider that to be a fair trading price, and people will often be willing to pay both Joe and Jim that $100 per share price because it looks like that's the price, or think they're really "getting a deal" if Joe or Jim will sell to them for $98.

Now lest we be unclear, as soon as the side transaction comes to light, the SEC and FBI are going to sweep in and both Joe and Jim are going to find themselves charged with share price manipulation, which is to say, fraud.

The situation I've described as defrauding the lender in this instance is no different at the root. You are hiding a part of the transaction in order to induce the lender to give you a larger loan than they otherwise would have.

Now, before I leave this subject, I want to ask you what kind of an agent or loan officer you'd trust to commit fraud upon someone? When such activities are discovered, such agents and loan officers lose their license and usually go to jail. Do you want to do business with a loan officer or real estate agent who commits fraud? Who deserves to lose their license and go to jail? If they're willing to lie and commit fraud upon one part of the transaction at the lender's expense, why would they be unwilling to lie and commit fraud at someone else's expense? For instance, yours? If I were to point out some agent or loan officer who is under indictment for fraud, and is going to lose their license and go to jail as soon as the verdict comes back, I'm sure you'd all go right out and book a transaction in a hurry with them right now, right?

Now this would-be client quickly lost interest when I explained all of the above. He said, "I'll get back to you on the property!" and hung up. He'll find someone to help him out, no doubt about it. But that's one transaction a good professional wants no part of. I'm better off without him. And I'm confident that if he actually pulls a few of these transactions, one day he'll go to jail and be a convicted felon, and that is as it should be.

Caveat Emptor


About half the listings around here do not have a single number asking price, but rather a range in which offers will be considered. Even many agents have trouble understanding range pricing. I've seen and heard more than one agent rail against it, saying that it is essentially "repricing the home".

Range pricing began in Australia and was brought to the United States by a certain major real estate chain. That chain is not one I particularly like doing business with, but that doesn't mean range pricing is a bad idea.

Range pricing is a way of starting people talking, and to begin the negotiating process; nothing more. If there's no offer made in the first place, I can guarantee there will be no transaction. The idea of range pricing is to jump start the negotiations.

Range pricing is not appropriate for all properties, nor in all markets. In the buyer's market we have now, I'm certainly more hesitant to use it, as it offers more information as to the owner's state of mind. In a seller's market where prices are rising rapidly and sellers have all the power, it gives an indication as to what a serious offer is and what it is not. In a buyer's market like now it tells some buyers exactly how much leverage they may have. I'm also more leery of using it on commercial properties.

One thing many agents (and others) misinterpret range pricing to mean is that any old offer inside the range should be accepted. This is the mark of an inexperienced negotiator. If they say offers will be considered between $400,000 and $425,000, that is not the same thing as saying "I want $425,000, but I'll take $400,000." There are many other terms and conditions on a purchase contract besides just the price, and there is no mandate to agree with even a full asking price offer if those other terms are prohibitive. Indeed, an agent who knows how to figure out other terms to offer in place of higher price is likely to save you far more than any commission they earn. Even price is rarely just price. For instance, if I write an offer for $410,000 cash, no contingencies, with a $10,000 deposit, most sellers should rightly treat that as superior to an offer of $425,000 with the seller paying $10,000 of closing costs and only a $2000 deposit, contingent upon financing for sixty days. Note that the seller nets over $4000 more if the latter offer actually closes, but the former is a much stronger offer and if two such offers were to come in and other things were equal, I'd strongly counsel taking the cash offer, especially as the latter offer is indicative of a not very well qualified buyer without much commitment to the idea of purchasing the property, and there would be a high probability that the transaction will not actually close. There are all kinds of terms on purchase contracts, and having a discussion as to what's important to the other side can be a way of making your offer much more attractive without necessarily raising your price. For instance, owner occupants are often understandably nervous about whether the transaction is going to close, and committing large sums to alternative housing before it actually does close. If you can think of a way to address that concern, you're miles ahead of the negotiator who can't. Every situation is different, and what works one time may not be appropriate to even offer the next.

So if I see a property with range pricing of $400,000 to $425,000, I want to educate my buyer clients that an offer of $400,000 even with the seller paying up to $20,000 of closing costs is not within the range indicated. Indeed, as I've said elsewhere for such offers, a $380,000 sales price with the buyer paying their own way is a superior offer from the seller's point of view. If they insist, I must and will submit it, but even in the current buyer's market I wouldn't be surprised to see it rejected outright with no counteroffer.

In the current buyer's market, those few buyers willing to purchase properties have an enormous amount of power, and this will continue until the seller to buyer ratio gets a little less lopsided. So in the current market, I might actually offer significantly less than the asking price range, secure in the knowledge that if this seller rejects it, I'll find something just as good tomorrow where the seller will accept. Some will. So if some won't, so what? You learn to spot the sellers that have the power to refuse, and the ones who have to take anything vaguely reasonable.

Now admittedly, I don't do a lot of listings, as most sellers don't like to listen when I tell them to price their property to the current market if they want to sell. (And if they don't, why are they talking to me?) I've only got one listing right now, and quite often, none. But when I'm showing them what the market is like, and what reasonable prices for properties like theirs are right now, I'll ask a couple of questions once I'm convinced they understand. Everyone knows what they want to get for the property, and by the time I'm done, they better understand what a reasonable asking price is and why it's stupid to list for more. But after that, once I've explained that there are offers and then there are offers, and the price isn't the only thing worth paying attention to, I'll then ask them, "Now that you know what a realistic asking price is, what would be the lowest price you would consider selling for, if someone offered everything else you wanted? Great deposit, all cash, no contingencies for financing, etcetera?" Next I'll ask, "How far over the realistic asking price we've agreed on would you require going if the buyer came up with some odious terms: takes possession early, no deposit or not much of one, wants a long escrow, etcetera?" Rebates always raise the necessary price at least dollar for dollar, by the way. A $380,000 offer with no rebate is superior to $400,000 with $20,000 rebate from both buyer's and seller's perspectives. Then, depending upon how much the seller needs to sell, I'll use that information to help me figure the endpoints of the asking range (assuming I'm not just going to use a single asking price). I won't just use either number, of course. But that, together with the state of the market and how much power buyers think they have in the market at the time, will give me a good feel for what the lower number of the range should be.

There is another, entirely different benefit to range pricing is that when the search is done on MLS or its substitutes, the lower number in the range is going to trigger your property coming up on more searches. Now, if you're a listing agent, MLS and MLS substitute buyers are more likely to be aggressive, and often unrealistic, bargain hunters, as opposed to people who really want to live in the neighborhood around this property. MLS inhabitants are not my favorite buyers when I'm listing a property, for that and other reasons. But if this property comes up on their search, they might look, and if they look, they might make an offer my client is happy to accept. If they don't even see it as they're searching, I guarantee no offer will come in from them. So range pricing helps me capture these people's attention. Whether interest, desire, and action follow is anybody's guess. But they might, where without range pricing they definitely wouldn't.

In short, range pricing, properly done, is not repricing the home, and it is a good way to get the buyer and seller to the table. It is not appropriate for every property in every market, but for those it is appropriate for, it's a useful tool. Properly used in the right market, it can even help your seller get a higher price for the property than any single number asking price you'd dare use.

Caveat Emptor.


RINO Sightings

Carnival of The Capitalists

Carnival of The Vanities, which I'm tempted not to link due to host impatience. Recommended: Adam's Blog (Wheel of Allegations), Random Yak (the limitations of statistics)


Well, they didn't quite say they claimed the right to blow up any infidels they wish, but things are not looking better with Iran. Iran says won't back down over atomic rights


This is an outrage

Sign a Petition to help them out here.


This goes to show that if you file a sufficient number of lawsuits, you'll find a judge stupid or prejudiced enough to go along with you, even if the Supreme Court has ruled otherwise. Judge Nixes Warrantless Surveillance

U.S. District Judge Anna Diggs Taylor in Detroit became the first judge to strike down the National Security Agency's program, which she says violates the rights to free speech and privacy as well as the separation of powers enshrined in the Constitution.

Contrary to higher court precedent. The Fourth and Fifth Amedment guard against criminal incrimination, not against the government finding out somebody intends to blow up a building before you do it. If they try to arrest you, the evidence is tainted and so they can't use it. But if they don't arrest you or charge you with a crime, such surveillance is irrelevant.

I'm a big non-believer in conspiracy theories. They're just a non-starter with me. But I have one that fits the observed facts. The current President's political enemies are doing all they can to throw roadblocks in the way or preventative measures, so that when (not if!) the terrorists succeed in another attack, they can use his "failure to prevent" it against him politically to garner votes.

Please debunk it with facts if you can. I'd like to not believe that Americans would do that sort of thing.

Powerline has more.

Volokh Conspiracy dissects it.


Promotion Time! Plan Would Add Planets to Solar System. Pluto stays, and UB313 and Charon get added, as does Ceres.


Whoever came up with that quote about capitalists selling people rope which will be used to hang them was probably thinking of France: France Calls for End to Lebanon Blockade

Meanwhile, Hezbollah is reneging upon a key component of the cease fire Lebanese Cabinet OKs Troop Deployment to the South, but Skirts Issue of Disarming Hezbollah

Remember the research on the most effective way to lie? Syria is certain being selective in how much of the truth to tell. Nor is "Baby Dentist" Assad high on the list of people I would consult about who's an object of ridicule.

This I view as a hopeful sign: At war, Israeli reservists wield new weapon: opinion polls

"It's the first time ever it's been done, and I think it's a new tool," he says. "It's not refusal of orders or officers. If you do that, you abandon your friends in the field,..."


"It's not supposed to be a moral dispute. There weren't any villagers left there at that point, just Hizbullah men," says Yannay. The soldiers began to question the wisdom of their orders.

Scrappleface has it's own take on the issue.


Homeowners lose Katrina insurance flood case

Flood is specifically excluded from homeowner's insurance. I'm sorry for the folks who were told they didn't need flood insurance, and I hope they have a case against the agent who told them that. But this decision is correct, as I indicated in this article almost a year ago.

**********"target="_blank">Coast Guard delivers Arellano Felix to San Diego Caught him in International Waters.


The only poll that matters is in November, but Poll: Lieberman Ahead, High Favorability

Basically, now that we're out of the hothouse of Democratic activists, Lieberman is significantly ahead and the numbers don't look good for Lamont, who actually has very high negative perceptions, especially with Republicans and Independents. Gee, I wonder why.

Big Lizards thinks the Donkeys are doomed in national elections.


Via Powerline,

Vital Perspective notes that the Iranian government is going house to house smashing satellite dishes.

Now why would they want to cut their citizens off from listening to foreign media?


Belmont Club has printed the entire text of Alexander Solzhenitsyn's address to Harvard in 1978.

A Decline in Courage ...

may be the most striking feature which an outside observer notices in the West in our days. The Western world has lost its civil courage, both as a whole and separately, in each country, each government, each political party and of course in the United Nations. Such a decline in courage is particularly noticeable among the ruling groups and the intellectual elite, causing an impression of loss of courage by the entire society.


no weapons, no matter how powerful, can help the West until it overcomes its loss of willpower. In a state of psychological weakness, weapons become a burden for the capitulating side. To defend oneself, one must also be ready to die; there is little such readiness in a society raised in the cult of material well-being. Nothing is left, then, but concessions, attempts to gain time and betrayal.

neo-neocon has some noteworthy thoughts.


Hurray! Lebanese army to be only force to bear arms.

An official in the Prime Minister's Office warned on Tuesday that the IDF would have to resume operations in Lebanon if Hizbullah is not disarmed.

Lebanese Prime Minister Fuad Saniora and Hizbullah leader Hassan Nasrallah reportedly reached a deal allowing Hizbullah to keep its weapons but refrain from exhibiting them in public. Israeli officials called the arrangement a violation of UN Security Council Resolution 1701, which passed over the weekend and was approved on Sunday by the cabinet.

"The resolution is clear that Hizbullah needs to be removed from the border area, embargoed and dismantled," the official said. "If the resolution is not implemented, we will have to take action to prevent the rearming of Hizbullah. I don't think backtracking will serve any useful purpose. There has to be pressure on Hizbullah to disarm or there will have to be another round."

Captain's Quarters notes a Lebanese general jailed for having tea with an Israeli officer.


Captain's Quarters has a good article on observing the people rather than intensive searches of carry on objects.

I think profiling is rather unlikely to be really successful as long as people like this are walking around loose.

Related article here.


In case you hadn't noticed, things are kind of hectic right now.

what happens if partner refuses to pay his half of the mortgage?

The lender will hold you each responsible for payment in full. That's the long and the short of it. You both agreed to the loan contract, and if it's not paid in full there will be all of the consequences: Hits to your credit, notice of default, foreclosure.

This is basically blackmail on the part of your partner, and a disturbing number of partnerships have this phenomenon. The only way I know of to recover the money is through the courts, which takes forever and costs more money. Even when you have a judgment, it can be difficult to actually get the money if they have taken certain steps to place it beyond your reach. Talk to an attorney right now, keep good records, and send everything Certified Mail.

Unfortunately, there are no method except time that I am aware of to repair the damage to your credit once it has been done. You just have to wait it out. For that reason, it is usually cost effective to loan your partner the money, even at zero percent interest.

What if you don't have the money for both halves of the payment? Well, that's a real question, and the answer is found in the article What Happens When You Can't Make Your Real Estate Loan Payment. This is not a good situation to be in. Talk to that attorney about liquidating your investment. It takes time and a lot of money if your partner doesn't want to.

What can you do to prevent this from happening? Pick a good partner that won't pull this nonsense. Spend the money to protect yourself up front with a partnership agreement. But the fact is that if your partner wants to be a problem personality, you really can't stop them in the short term. Not that it makes any difference to your pocketbook, but sometimes it's not intentional. People do fall on bad times for reasons not under their control.

Corporations are another step people take to protect themselves from this sort of thing, but that brings in all sorts of further problems. How the corporation qualifies for a loan is often a significant problem, and many times practically speaking, is insurmountable.

Borrowing money in partnership with someone else is something to be done with a lot of forethought and preparation, otherwise there's nothing you can do when bad things happen.

Caveat Emptor


Carnival of Real Estate Recommended Linda Slocum (lead aggregators services)

Carnival of Personal Finance Recommended CappApp (extended warranty and cash management)


About as surprising as gravity: Hezbollah Claims Win As Lebanese Return. That's the way their game is played. And by their standards, they did win. Outside agencies who think they're being all noble about it nagged Israel into letting Hezbollah survive, and gave them yet another chance to grow back to what they were, so they can take another shot as Israel.

I'm going to have to say the President gets one very wrong and one very right here: Bush Says Israel Defeated Hezbollah. Only militarily. Strategically and politically, Hezbollah is the big winner.

The one he gets right?

Bush said the "responsibility for this suffering lies with Hezbollah."

neo-neocon notes that Hezbollah has stopped pretending, and forced the Lebanese government and army to dance on the end of its strings, stopping the Lebanese government and army from taking control of southern Lebanon.

Captain's Quarters thinks Lebanon is about the fall officially to Hezbollah.


Don Surber takes the reductio ad absurdem path to rebutting a NY Slimes editorial.

Let's face it, rebutting the Times has become easier than depth charging fish in a barrel. It only becomes challenging when some third party dictates the method.


Environmental Republican on those who want to harm the US.

While I'm on the subject, In Denial over Terrorism.


The president of Iran has a blog. I went and looked at it, but Babel Fish doesn't do Arabic or Farsi to English. Eteraz, on the other hand, did not need my crutch.


I can only pass this along in horror: The Youngest Suicide Bomber

And some people do not believe there is real evil in the world.

Disasters and the Mortgage

| | Comments (0)

after Katrina I am upside down with my mortgage.
my house is uninhabitable. My flood insurance check
doesn't payoff the mortgage. How can i get a short payoff
due to financial hardship - i.e. relocation loss of jobs and
steady income?

This is one of the hard truths about mortgages. They are a contract between you and the lender to pay back a certain amount of money that you borrowed in order to purchase that property. They have nothing to do with any unforeseen hardship, and if you do not pay that money back, in full and on schedule, you can anticipate negative consequences no matter how good the underlying reason. Especially to your credit, and those are going to be long term consequences indeed.

Now unforeseen disasters, like Katrina, Earthquakes, floods, fires etcetera, are one of the biggest reasons why things go wrong with your ability to repay that money. Something happens to the property and now you can't live in it, and you do need to pay for housing elsewhere. Furthermore, in widespread disasters like floods and earthquakes, since your job may no longer be there, you may have to relocate a considerable distance away in order to find work, and have difficulty paying your mortgage even if your property, in particular, came through just fine.

There are several issues that trap the unwary or uninformed consumer. Homeowner's Insurance in general is the first of these. Many lenders in other states have requirements that the property be insured for the full amount of all mortgages against the property. This requirement is illegal in California (and a few other states), and actually is counter-productive as this implies that the objective is to pay off the lenders, when the objective of insurance is to repair the damage. The phrase that California lenders look for in the policies of homeowners insurance that any lender can and all lenders do require is "Full replacement value." In other words, the insurer must agree to bring the property back to being in the same condition it was in prior to the covered event that caused the damage. Nonetheless, there are many properties where this kind of coverage is not available, most often due to their location in areas vulnerable to periodic fires. In such instances, you can expect lenders to require significantly larger down payments and charge higher interest rates, if they are willing to lend against the property at all. Since in the current "Everybody buys with 100 percent financing" trend this severely impacts your ability to sell your property, and therefore the value you will receive for it, you should be advised of the difficulty before you purchase the property, no matter how much you have for the down payment. An agent who doesn't tell you about this issue on properties where it is an issue is either incompetent, or not looking out for your best interest.

Another issue with homeowner's insurance is that you must keep the insured amount reflective of your home's current value. If you bought ten years ago here in San Diego, you probably paid about $150,000 for a three bedroom single family residence. I don't know of any single family residences below about $350,000 now, and most are in the mid 400s or higher. The insurance companies, quite reasonably I might add, take the position that even if you have "full replacement value" coverage, your home is only insured for $150,000, and is worth $450,000, you are not insuring it for the full value and will not pay the full bill for any repairs even if it is only for $100,000. In such a case, it's been a while since I went over the figures that are the legal basis for the math, but in this particular instance, I get that the insurance company will pay $41,666 out of that $100,000 repair bill in this particular instance. The threshold is legally if you had the property insured to at least eighty percent (80%) of its actual value, they will pay the full bill, but you only had it insured to 33 percent of the value, and therefore they will only pay 33/80ths of the bill. So once every couple of years (more often in markets rising 20% per year!) talk to your insurance company about making certain your property is properly insured. Yes, you'll pay more money, but it is a trivial amount compared to the cold hard fact above. My first property has multiplied in value by about three and one half times, and the difference between the insurance premium then and the insurance premium now is less than fifty percent. Now some insurers (mine among them) have a good record of not invoking the 80 percent rule I'm talking about here and paying the full amount, but this is a matter of company policy, not legal requirement, and it can be changed at any time and no matter how benevolent they are, if the disaster is bad enough they will have no choice. Furthermore, those folks who keep their coverage updated are de facto paying for those who don't under such a policy, and for those who do make a habit of keeping their insurance coverage updated may find more competitive rates with other insurers.

Two things everybody needs to be warned about is that no regular policy of homeowner's insurance, not even the vaunted H.O.3 policy with the H.O. 15 endorsement, covers against flood or earthquake. If possible flood or earthquake is an issue where you are, you need to buy a special policy to be covered by them. Flood and earthquake policies usually have a higher deductible than a basic homeowner's policy, and the reason for this is simple: solvency of the insurer and price of the insurance. Flood and earthquake are typically widespread devastating disasters that make for major damage over a widespread area. If the deductible was smaller, the price of the added policy would need to be much higher, as paying off such claims strains the financial resources of even the strongest insurer. Now if you're buying on stable soil atop the highest ridge line for miles around, flood insurance is probably not a worry for you. I sit roughly two tenths of a mile from a creek bed, but the amount of territory it drains is relatively small, only a of couple square miles, as the big watercourses go well away from where I sit and there are large hills between me and them. On the other hand, being in California, I've had earthquake insurance since the day I bought the property.

One more thing with flood insurance: There is a federally mandated thirty day waiting period between application and payment of premium and the time it goes into effect. This is to prevent, for instance, people in New Orleans waiting until there is a hurricane headed their way and rushing out and buying flood insurance, then canceling it and asking for a return of their premiums afterwards. I think the thirty day requirement is waivable to the extent that it can go into effect on the day you buy your property, but talk to your insurance agent.

Now, one final thing to be aware of. The value of the land itself is not insured, only the value of the improvements to that land. If a flood goes through your land, the land will still be there afterwards (and research riparian rights sometime if you're worried it will not be - another thing a good agent should warn you about if it's relevant). So if, like many in San Diego, you bought the property for $500,000, but it only cost the builder $200,000 to put the property together, the value of the land is obviously $300,000, right? Well, your mortgage is for eighty percent or ninety percent of the value of the improvements plus the land. Let's say 80%, $400,000, although I suspect that's on the low side of both mean and median. So when a disaster destroys the improvements (i.e. the home) and your insurer sends you a check to rebuild those improvements, that $200,000 check is obviously not going to cover the full amount of the mortgage. What do you do?

Well, that's where the importance of a good insurance policy, that will cover the costs of housing while you rebuild in addition to the costs of rebuilding the home in the first place, comes in. You'll also need to learn the value and importance of managing cash flow versus amount you may owe, but that's a subject for another essay and you should consult a good professional financial person if you haven't learned this before said happens in any case. Trying to learn that financial skill "as you go" is a recipe for guaranteed disaster. Furthermore, no matter how good your policy of insurance is, there is always a deductible and there are always extra expenses of rebuilding that you need or desire to undertake because it's the best and cheapest time to do so. This illustrates the value of building up and maintaining an emergency fund that you can access, because even if the finished property will be worth far more, no regulated lender will touch a refinance for cash out while the property is still under repair. A "hard money" lender might lend you new money, but they require so much equity in the property "as it sits right now" that this is not an option for the vast majority of all property owners. And in the meantime, you must keep up all payments required under the original loan contract you agreed to.

Caveat Emptor.


Veterans Administration, or VA loans, are government guaranteed loans available to veterans and active duty members of the armed services, that enable them to purchase homes for not money down. In fact, VA loans go up to 103 percent of purchase price to allow for some closing costs as well.

VA loans are a unique creature in the world of mortgages. Because there is a government guarantee on the loan, they are available, usually at the same rate, whether your credit is perfect or abysmal. They have a qualification limit equal to the conforming loan limit from Fannie Mae and Freddie Mac, $417,000 as of this writing.

Now, the Veterans Administration runs a website where you can get all kinds of information on VA loans, but I'm going to touch some high points.

VA loans are available both for purchase and for refinance. There is a streamlined program for pure interest rate reductions that can sometimes be at documents in as little as a week. This is called the Interest Rate Reduction Refinance Loan program, or IRRRL, but usually just called a VA streamline. There is, or so I understand, a cash out program as well, but I've never done one of those.

All VA loans have two important feature: Government Guarantee and Assumability. The government will guarantee a certain percentage (usually 25% of the original loan amount), which is more than enough to persuade most lenders that these are loans worthy of a fairly low rate, as they are low risk. A person with a VA loan can allow anyone else to assume it, with the approval of the lender and the VA. They have to prove they qualify for the loan, and the veteran still has some responsibility for the loan. Last I checked, prepayment penalties on these loans were prohibited.

Now the bad news. Even with the government guarantee, the rate/cost trade-off isn't the best. Most VA lenders want at least two discount points for their VA loans, a fact which makes low cost and zero cost VA loans problematical. Even with those discount points, the rate will probably not be as good as A paper. Veterans with good credit, particularly if they have a good amount of equity or a decent sized down payment, will generally be able to obtain a better rate at a lower cost in the A paper marketplace. Even so called A paper "jumbo" loans over the $417,000 limit, or A paper "stated income" loans, will have a significantly lower rate/cost trade-off than the VA loan. They're better than just about all sub-prime loans, but they lose out to A paper.

If you have good credit but not much of a down payment, the VA loan can be an option worth exploring. VA loans have no mortgage insurance requirement (aka PMI), that purpose being served by the government guarantee, and so splitting your loan into a first and a second mortgage in order to avoid mortgage insurance, with the second being at a higher rate, is generally not necessary, and your full loan amount can be at the lower rate of the first mortgage. But be careful, because once again, most VA lenders want their two discount points, and maybe more. You might want to read my article on the Trade-off between Rate and Cost in Real Estate Loans and Why You Should Ignore APR for more as to why. Nevertheless, this could go either way and is well worth shopping the loan both ways.

If you have rotten credit, a VA loan can be the only way you can purchase a home, particularly if you have no down payment. Since credit is irrelevant and there's a government guarantee, I used to know a couple lenders that didn't bother to run credit for VA loans. Even the ones that do, it's just a checked box that plays no part in the decision making and underwriting process. Furthermore, you get a rate of a sort that would normally be available only to someone with a much higher credit score than yours.

Now in addition to relatively high closing costs, there are some other games that get played with Veterans Administration loans, of which the Rate Buydown is probably the most pernicious and widespread. But if you're one of those veterans who thought they could never be approved for a loan on a home, VA loans can make it happen where nothing else could.

Caveat Emptor


Annuities, Fixed and Variable

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One of the most discounted investments available is the annuity.

An annuity can be thought of as the opposite of a life insurance policy. Instead of creating an lump sum of money, an annuity liquidates one by providing you instead with a stream of income.

The original idea is simple. Suppose you get a lump sum of money, and you have no immediate use for it. What's more, you think you might waste it if it's just sitting in the bank. So you decide to invest it with an insurance company, who will then pay you so much money per month, every month.

The real kicker, or reason for doing this, lies in the options for payoffs. These fall into three basic categories. Period certain, life, and life with period certain.

Period certain means you'll get payments every month for however many years. If you die, your heirs get them. When that number of years is over, so is your payout.

Life payouts equally straightforward. You (or you and your spouse in joint life payouts) get those payments every month until you die. When you die, they stop. You could get hit by a bus the next month, or live another 150 years. However long it is, the payments continue for the full amount of time, and stop as soon as your life is over.

Life with period certain means that the payments will continue for your entire life, however long that is, but there will be a period of some number of years where if you are hit by that bus, your heirs will continue to get payments. This is highly useful to people who have minor children, who are thus assured that their children will continue to get something if they die.

The idea of either of these last two options is that you have an insurance company guaranteeing that you will not outlive the income you get from this money. This can be a very psychologically comforting thing for all sorts of people in all sorts of situations, who are thereby assured that they will have something to live on.

Annuities come in two flavors of beginning, immediate and deferred. Immediate means that here is this lump sum of money, annuitize me (start sending me a monthly check) right now. Deferred means I'm investing it with you, and I may invest more with you later, but let's just let it grow for now as I don't have any immediate need for the money. You can also withdraw money from a deferred annuity without annuitizing, but the tax treatment is not as favorable (see this article)

Annuities also come in two flavors of investment, fixed and variable. Fixed annuities are merged into the general assets and liabilities of the insurance company. You invest with them, they will guarantee you a fixed return, usually somewhere in the range of four to seven percent. Of course they turn around and invest your money and usually earn about 11 percent or so, but they assume the risk. The only risk you have is that the insurance company goes completely bust, but for this reason there are several rating services for insurance companies as to financial strength. One form of fixed annuity, Equity Indexed Annuities, are very popular right now with certain segments of the financial services industry, but any guarantee you can find in any fixed annuity can be found, usually in superior form with a superior product, in variable annuities. However, sales commissions for fixed annuities are much higher, so if you go to the insurance agent on the corner, you're probably going to hear about a fixed annuity, especially if you don't shop around.

In variable annuities, you assume the investment risk while the company still furnishes the insurance component. This is done via investing them in a set of mutual fund-like sub-accounts. Once annuitized, they make use of an assumed rate of return (ARR) on the underlying investment, which is usually between four and six percent. The higher an ARR you choose, the higher your initial payout, but if the results are less than ARR your payments can usually be reduced. Most if not all companies offering variable annuities do offer a minimum payout guarantee, and if your actual rate of return exceeds the ARR, your payments will be increased (indeed, this happens more often than not, within my experience). Variable annuities require not only an insurance license, but a securities license (NASD Series 6 or Series 7) in order to sell them, and are therefore usually purchased from financial advisors. The reason is because now you are assuming investment risk. I will caution the reader that while variable annuity sales commissions are not larger than advisor's mutual funds, there is no reduction for higher investment amounts, so there may be incentive for some advisors to recommend variable annuities when mutual funds might be more appropriate. I have also seen "fee-only" planners take a fee for preparing an investment plan, then a commission for recommending these, where someone working on straight sales charge still gets the commission, but prepares the plan as "part of the package." Nonetheless, when reading articles in the financial press, especially the "self-help" financial press, there is a heavy tendency to exaggerate the downsides of variable annuities, and the hypothesis that best explains the reasoning is that variable annuities require a financial professional to work with you as an individual. If you are working with a professional you trust, you're not nearly as likely to go back to the bookstore or magazine stand for generic drivel with no fiduciary responsibility towards you. Admittedly, some advisors abuse it - and when they are caught, they are prosecuted and the insurance they are required to carry pays. The generic advice in books, newspaper, and magazines never has this responsibility in the first place. They are specifically exempted by the Investment Company Act of 1940.

I read a lot of, well, crap about variable annuity expenses. Most of it in the financial press, which should know better. How they have this expense and that expense and the other expense. The fact is that there are expenses associated with all annuities. The only additional expense that the variable annuity has that the fixed annuity does not is the expense of running the mutual fund-like sub-accounts, which actually average a bit lower than the equivalent mutual fund upon which these are usually based. Every other expense is part of every annuity - indeed, most of them are part of every insurance contract. Administration, Insurance, etcetera. They buy the stuff that makes an annuity an interesting and potentially worthwhile investment - that guarantee that you won't outlive your money, among other possibilities. But because you're dealing with something regulated by the SEC, the agent and the company have to tell you about them in variable annuities, whereas with every other insurance policy, they are a "black box" into which money goes and insurance comes out. Furthermore, variable annuities have a protection that fixed annuities do not. If the insurance company does encounter difficulty (rare for strong insurers), the variable sub-accounts are not assets of the insurance company, and cannot be attached by other creditors. They are yours.

Most companies offering annuities offer several options, depending upon what a prospective client really needs, and in what proportions. When I was in the business, the company whose variable annuities I most often sold when variable annuities were appropriate had twelve different annuities, offering this option or that option, depending upon which fit the clients needs, and they all had the same underlying subaccounts. On the other hand, I was appointed with a multitude of annuity companies, most of which I found had something to offer a certain client that was superior for that client's purposes to other offerings. Furthermore, variable annuity offerings evolve over time. I ran across a reference to one that I used to sell in its II and III editions the other day, and it's now in the VI form due to regulatory changes and a couple of product improvements.

On the pure investment scale, variable annuities have two significant upsides and one significant downside as opposed to mutual funds. The downside is easiest to explain. As previously discussed, they have a so-called "MIE" expense and charge ratio that goes from about one and a quarter to one and two-thirds percent per year (although some designed for asset-based management fees go as low as forty basis points), as opposed to 12-b-1 fees for most mutual funds are about a quarter of a percent per year.

The first upside is the fact that all monies invested in an annuity earn money tax deferred. This means that you're not paying taxes on money invested in annuities as you go, only when you withdraw it. This has the minor downside associated that it's all ordinary income, none of it capital gains, and capital gains may be taxed at a lower rate. Nonetheless, because you're not losing a fraction of your gains, you are earning interest on your taxes for those years until it's time to pay, as opposed to paying taxes on your earnings, after which they are gone. Depending upon various assumptions, this direct trade-off between higher MIE charges and deferred taxes will have a mutual fund theoretically leading an equivalent variable annuity sub-account for about fifteen years (I can get results varying from ten years to twenty-two without unduly torturing the assumptions), after which the variable annuity sub-account (net after taxes and redemption) will take the lead. This does not take into account investment re-balancing, which would work in favor of the variable annuity sub-account, as moving money between those has no tax consequences, something that mutual funds cannot say.

On the other hand, if you're talking about money that is tax-deferred by definition, such as IRA, Roth IRA, and many other sorts, the variable annuity sub-account does not gain the the benefit of the first advantage I just listed, as it is already present. Nonetheless, many very smart people nonetheless have tax deferred money in variable annuity subaccounts. Why? That's the second upside I was going to mention. Because the managers of mutual funds have to sometimes make decisions for the fund based upon tax consequences to shareholders, as opposed to strictly what's the smartest thing to do, investment-wise, as a large proportion of their shareholders investment dollars are not tax-deferred. But every last dollar invested in variable annuity subaccounts is tax deferred. So variable annuity subaccounts will usually outperform the equivalent mutual fund as far as investment return. I've seen estimates that range anywhere from fifty basis points to 150 basis points (0.5% to 1.5%) per year for the average of this number, depending upon who is doing the estimating. Given the 100 to 140 basis point difference in MIE vs. 12-b-1 charges, considered as a pure investment, this aspect of variable annuity subaccounts is likely to fall short of mutual fund returns considered from a strict "how many dollars do you end up with?" standpoint. Note, however, that the MIE buys some guarantees (insurance) in the areas of minimum returns, locking in high investment values, lifetime payouts, etcetera, which mutual fund 12-b-1 fees do not. If you're prepared to undertake a lot more risks, mutual funds will probably (but only probably) come out ahead. If you want some guarantees, the variable annuity sub-account has a lot to be said for it. I know of many people who were looking to retire based upon mutual fund account balances in 1999, who are still down major percentages of what their portfolio value was then. If they had invested in a variable annuity, that 1999 value might have only been 99 percent of the mutual fund value, but they would still have every penny of it and then some.

Caveat Emptor.

I shall make thee an offer thou canst not refuse! Actual plays that put a different twist on Shakespeare, including what if he had written "The Godfather."


Court Upholds NYC Subway Searches. Correctly. Whether the city police are performing the searches or not is irrelevant, just like the feds run the airline screening. Like airliners, the cars of the NY Subway are the corporate property of the MTA, a corporation which issues debt instruments in its own name. The city police, like the feds for the airlines, are performing a service in (theoretically) streamlining the process. If the ACLU has a brain (I'll wait until you stop laughing!), here is where they will drop it. It is not a constitutional right to ride the subway, and there is a public legitimate safety concern.


W.House: Democrats' extreme left defeated Lieberman No, I don't think anybody there reads my site. This is just a realistic assessment of what happened, and if I were Kos, I'd wait until the general election in November to crow. But I guess when you're 0-21, even the temporary illusion of a victory is precious.


While reading The Moderate Voice's article on the Israel Lebanon front, I was struck by an idea: Suppose Lebanon's insistence upon impossible terms is a cover for wanting Israel to wipe out Hezbollah for them, which they have not the resources or the political ability to bring about themselves?

Yes, Lebanon will suffer. But then it will be over, not this ongoing twenty-plus year sniping both sides with intermittent Israeli invasions, and Lebanon can get on with the business of building a country. Sound weird? There are precedents for it, and it's not likely the political leaders of Lebanon will be among the casualties, is it?

Related: A hard truth: Blackfive on the virtues of killing children. It hurts to read. But he's correct. (censored).


aTypical Joe has found a good commonsense research policy for using Wikipedia here

I never trust Wikipedia standing upon its own. It's okay for a quick toss off, but not a serious argument. At most, I might use it to confirm or question my recollections or what I already think I know. On a subject I do not have relevant level expertise, it is sometimes a good starting point for finding serious research, but never an authoritative source itself.

Officials: Plot suspects met alleged al Qaeda bomber

But officials, who say the plot displays signs of al Qaeda participation but who are still investigating that angle, do not know whether Rehman was involved in the plot.

On the political side, Arrests Bolster G.O.P. Bid To Claim Security as Issue

Senator Harry Reid of Nevada, the Democratic leader, said, "This latest plot demonstrates the need for the Bush administration and the Congress to change course in Iraq and ensure that we are taking all the steps necessary to protect Americans at home and across the world."

Always about politics, Harry? Newsflash: Purely defensive measures are an absolute guaranteed failure. If the terrorists keep trying, eventually they will succeed, and they seem to have a surplus of young religiously suicidal males, a combination that is much more difficult to defend against. There are two ways to try to get them to stop: Pay them off, which was tried by Carter and Reagan and Clinton (among others), and leads to more activity and encourages others to get into the terrorism game, or go in and clean them out, like our current president is trying to do. It may or may not work - it won't if Mr. Reid or the terrorists have anything to say about it - but there is at least the possibility it will work, and is therefore the option I support.

on the same point, via Carol Platt Liebau, Newt Gingrich in the Washington Post: The Only Option Is to Win.

via Chequer Board of Nights and Days, Gerald Baker in Times Online The first step towards defeating the terrorists: stop blaming ourselves

Sanity and reasoning are out there. But they don't get nearly as much media play. I was going to say "I wonder why?" but I don't think there is anyone out there who wonders why. The insanity is more spectacular, more bold, more fun. Why limit yourself with consistency or logic or historical precedent?

On the other hand, read this very rational, Alan Dershowitz article at Huff'n'Puff, and then read the comments until you can no longer stomach them. Dershowitz is not exactly your typical long fanged right-wing triumphalist, having considerably more in the way of leftist credentials than centrist or otherwise. Just go read it.

Getting back to the NY Times article,

"The issue is going to be discussed in the fall," this official said. "Are you saying if the Democrats talk about the war, we shouldn't? We will talk about the war, and we will talk about the consequences of the policies advocated by the Democrats."

Sauce for the goose. To quote Peter Lorre in The Raven, "You coward! You're defending yourself!" (nod to den Beste).

Republican strategists don't get it. The President does. Bush, on a Quick Trip From His Texas Ranch, Says Americans Are Safer Than Before Sept. 11. And then he goes back to living his life. Follow the president's example. All reasonable steps are being taken. Living in fear does nobody any good. Enjoy your life. It's the only one you've got. I'm not saying plan trips to Lebanon or Iraq, but there's no reason not to go about normal business.

To frame it in terms of a very old joke: What's green and smells like pork?


I just dealt with five pieces of trackback spam from a site that wants to sell spamblockers. Methinks there is something more than vaguely ironic about this...


Politburo Diktat has an extremely intelligent suggestion: put government funding of alternative energy sources on a war footing. Because we just might need it to win a war.


Lileks Screed has some poetic justice to muse about.

While we're on the subject of Cuba, NRO has a piece about how Raul is not the liberalizer all the left of center pundits are whispering devout prayers about.


On the subject of Joe Lieberman and the Connecticut election, Big Lizards is advising the Republican nominee to avoid splitting the "sane" vote. I endorse this position.

Michael Barone also has some relevant thoughts worth reading.


Volokh Conspiracy notes that those who receive classified information can now be prosecuted.

I disagree with this ruling, but I'm not the judge. I think the receiver should get as much of a free pass as possible, else we'll eventually be able to frame someone by divulging classified information. The leakers should be vigorously prosecuted to the full extent of the law, but the leakees haven't done anything that should be illegal.

Airlines on alert after foiled bomb plot

The suspects were "homegrown," though it was not immediately clear if they were all British citizens, said a police official who spoke on condition of anonymity because of the sensitivity of the case. Police were working closely with the South Asian community, the official said.

'Red' Alert on British Flights to U.S.

European Carriers Cancel Flights to U.K.

Airline stocks slammed after terror arrests

Will people stop flying? No. It's too convenient, and nobody believes it will happen to them. But airplanes remain extremely available, extremely destructive weapons. Where else can you find 250,000 kilograms with 100,000 kilgrams of it being flammible fuel, travelling at speeds of 200 plus meters per second, all encased in a fragile aluminum shell and conveniently accessible to members of the public, not disincluding those who have made enemy sympathies all too clear? This is 5 gigajoules just in kinetic energy! Our current precautions are laughably insufficient, and even counterproductive. Move all that stuff to checked baggage? Get real. If electronic devices can still be checked, you've got timed detonation and people who might have been required to sacrifice their lives might simply check in but not actually get onto the plane.

Sooner or later, some more terrorists are going to succeed in taking over airplanes. What are we going to do other than warn people that we're doing out best under the circumstances, but there's a good possibility that won't be enough.

Meanwhile, back on the left, Oliver Willis believes, as usual for things of this nature, that it's just a political frame job. It's like he's got his fingers cemented into his ears and is screaming "I am not listening to Bush!" It may be possible that someday he'll discover the drawbacks of using Super Glue for that purpose, but I'm not optimistic.

via QOAE, who has her own thoughts, Americablog proves he remains a loyal party commissar, hewing to the pravda of the day, and Daily Kos is convinced the War on Terror is all the result of a Bushite plot to control our minds and out government.

Quite frankly, if the scenario the lefties posit were true, The government has already killed some 6000 Americans (9/11, Afghanistan, and Iraq) and several time that number of peaceful moslems who never meant us harm. Why would such an Administration stop a second set of murderers short when they could get so much more political mileage out of dead bodies?

I thought Karl Rove was some kind of evil supergenius advising Rethuglicans on how to best maintain their absolute grip on power? I thought George Bush was an undead Hitler zombie with a genius for propaganda manipulation? Silly limited intellect that I am, I saw this in about two microseconds. Why didn't these superhuman intellects of evil?

I suppose if they didn't have fingers superglued into their ears they would be exclaiming Norman correlate! as a prelude to a Scanners-style head explosion.

Protein Wisdom takes down a delusional reporter and his enablers in much the same way. "I question the timing" indeed. Is there any point in time at which this revelation would not be politically helpful to the party which is not in complete denial about the threat we face?

Strata-Sphere connects a couple of dots.

Riehl World View notes that some of those arrested today have ties to those involved in the July 7 bombings last year.

Jawa Report relates information that the terrorists involved are linked to Sheikh Omar Bakri Mohammed, exiled from Britain

Powerline: "No brotherhood excuses murder." I really would rather CAIR were out of the ordinary on this, but if Bar Associations, et al can't do it, why should we expect it of CAIR?

Jihad Watch notes that Moslem employees of Heathrow with "all Access" passes were involved.

via Dean's World, a timesonline report that Pakistani intelligence was a critical factor.

LGF names terrorist names.

I like the way this man thinks: Why Don't We All Consider A Little STFU?

Michelle Malkin has a massively important roundup, and another on the Moslem mindset.

via Instapundit, Irish Trojan wonders if this was the big August 22nd thing Ahmedinejad was talking about? If so, we may be going to war with Iran very soon.

Option ARMs and Cash Flow

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One of the standard arguments I hear about negative amortization and Option ARM loans is that they "give the client the option to make a smaller payment if they need to." This so-called "Pick A Pay" benefit is a real benefit, but it's an expensive benefit, one that the client will pay for many times over. They are better off just managing their money well to begin with.

Let's go into some details. Let's consider someone with a $400,000 loan on a $500,000 property, and dead average credit score, and to keep the playing field level, the same 3 year "hard" prepayment penalty. On this morning's rate sheets (outdated by the time you're reading this), I have a 30 year fixed rate loan at 6.00 percent, less than one point total net cost to the consumer. The equivalent Option ARM/"Pick A Pay"/negative amortization loan is actually a little above 7.5 percent real rate, although it carries a nominal rate of 1%. Furthermore, removing the prepayment penalty would make a difference of about an eighth of a percent to the rate on the thirty year fixed, while I have yet to see a Negative Amortization loan that even had the option of buying it off completely, and this loan carries higher closing costs to boot.

Now, let's crank some numbers. That thirty year fixed rate loan has a payment of $2398.21. Nothing ever changes unless you change it by selling or refinancing. The first month, $2000.00 even is interest and $398.21 is principal. You pay for a year, $23,866.38 in interest and $4912.05 in principal is gone, and you've made payments totaling $28,778.43. You are also free to pay down up to twenty percent of the loan's principal in any year without triggering the prepayment penalty.

Plugging in 7.5% for the real rate to keep the math a little easier, the Negative Amortization Loan has four payment "options" of $1286.56, $2500.00, $2796.86 or $3708.05. These options represent "nominal" payment, "interest only" payment, "30 year amortization" payment, and "15 year amortization" payment. Actually, the last three options will vary every month, and trend upwards under these market circumstances, but let's hold them constant just to make my point. As a matter of fact, if you don't make a habit of paying at least the thirty year amortization payment, the options will drift up over time. The chances of this happening in the real world are minuscule, as I make clear in my first article on this subject, Option ARM and Pick a Pay - Negative Amortization Loans, but let's play the game, just to see how it turns out if you give the advocates everything they ask for and more.

Crank the numbers through for twelve months, and you've paid $29,874.96 in interest, $3687.34 in principal, and made $33,562.30 in total payments. This is the "going along, making the loan payments" that the advocates are talking about. Here's a table, comparing this to the 30 year fixed rate loan:




total paid
30 Fixed



Option ARM




When you put it in those terms, I don't think there's any question which loan a rational person would rather have. But that's not the situation the advocates would have us believe is beneficial, at least not with this particular argument. Let us presume that two months out of that year - and to keep the math as simple and as favorable as possible, let's make them the last two months - that you decide you have the need to make minimum payments, and let's see what happens. you've paid $29884.40 in interest, lost all but $657.30 in principal payments, and made $30,541.70 in total payments. Now, if you're making the minimum payment more than one month out of six, most folks should agree it's not an "occasional" thing, it's more of a "regular occurrence" thing, which situation I have already done the math to refute any claims of advantage. Here is a table comparing that to the thirty year fixed rate loan:




total paid
30 Fixed



Option ARM




Look very carefully at that "total paid" row. The thirty year fixed has saved you $1763.27 in total payments. Now, this begs the question of what you're paying it out of, but if you haven't got the income to make the payments from somewhere, you shouldn't have the loan. It's not good for you. So we're assuming that money is coming from somewhere, and as I have illustrated, if you'll just not spend it as it comes in and set a little bit aside in case something happens to your cash flow, that 30 year fixed rate loan leaves you with $1763.27 of your hard-earned money in your pocket. Not to mention just an all around better situation, as evidenced by the rest of the second table.

Now, given the fact that these loans have basically nothing to recommend them to clients, why do alleged professionals keep pushing them off on the public? Well, two reasons, both of them having to do with money. $$$. Coin of the realm. Specifically, commission checks.

First off, it should come as no surprise to anyone that lenders are willing to pay very high yield spreads for negative amortization/Option ARM/"Pick a Pay" loans. The yield spreads start at about 3 and a quarter percent of loan amount, and go up to 4 percent, with most clustering in the higher part of the range. By comparison, that thirty year fixed rate loan pays 1 percent. On a $400,000 loan, like the one in the example, that's the difference between a $4000 check and a $15,000 check. Doesn't that make you feel good that they left you twisting slowly in the wind so that they could make $11,000 extra? Didn't think so.

The second reason that people do this to you is that it makes it look like you can afford a larger, more expensive property than you really can. Most people tell professionals how much property they can afford in terms of monthly payment. Well, shopping for a property or a loan by monthly payment is a disastrous thing to do, as the first part of this article, among many others, illustrates. But let's say you tell the Realtor that you can afford $2500 per month. Now most people are thinking of mortgage payments in the same terms as rent payments, when most people can afford a higher mortgage payment than rent, but let's use these numbers. Let's just use that numbers, and have insurance and property taxes call it a wash. For $2500 per month payments, you can make real payments on a $410,000 property, or you can make minimum payments on a $775,000 property. At 3% buyer's agent commission, assuming they are only representing you and didn't list the property, and assuming they do the loan as well, they can get checks totaling about $16,400 for the buyer's agent commission and loan in the first situation, or $52,300 in the second. Not to mention I don't have to tell the client to limit themselves to what their pocketbook can afford in the second situation. Even here in San Diego, that $775,000 property is a beautiful five or six bedroom 2800 square foot home with all of those nice little extras like travertine floors, three car garage, marble counter-tops, etcetera, in a highly sought after area of town with great schools, whereas the $410,000 property has linoleum floors, no garage, Marlite counter-tops, and is in a neighborhood with marginal appeal and probably not so wonderful schools. Which do you think sounds like a more attractive property and an easier sale, for what the typical buyer thinks of as the same payment? Which property do you think the typical buyer is going to select, particularly if they have never had all of this explained to them?

Finally, for pure loan officers, it's a way of appearing to compete on price without really competing on price. The average person is told about this great 1% payment of $2500 when the real payment for a thirty year fixed rate loan (allowing for the fact that this has become a jumbo loan) is $4771.80, and they just aren't looking at little things like two extra points of origination or higher closing costs, as it just doesn't make that much difference to the payment. They can also slide in a higher margin over index that gets them an even higher yield spread, and it doesn't influence that minimum payment at all, which is the only thing this client has their eyes on. So what if the final payment comes in at $2600 (making the loan officer roughly $35,000 or more)? So what if their loan balance is increasing by $2000 per month? Most people just do not and will not do the work that enables them to spot this trap.

Caveat Emptor.


Survey: Online Sexual Solicitations Down

Well, the number of stories that have been in the paper, even the stupidest child molester must be peripherally aware that while they can pretend to be a young attractive person who's trying to be their target's friend, that attractive fourteen year old target they're chatting up can also pretend like they're not an FBI agent, right up to the moment when the cuffs go on. Bwahahaha!


Dean's World has a thoughtful "to be continued" on one of the most famous photgraphs of the Vietnam War, and news photgraphs as well. I've long known the backstory for this particular photograph, and while I understood the propaganda uses, I also have enough historic background of military practices to know that this sort of thing is actually enshrined in the Geneva Conventions. The executed person had just undertaken what we today would consider a terrorist attack and was caught at the scene. Note that he is not in uniform, as you can tell even with the photoshopping. This is clear grounds for immediate execution without trial according to the Geneva Conventions.


Well the Democrats lost one yesterday, and the wire services are making a big deal about how the top Donkeys are abandoning Lieberman. Them's the rules. The winner of the nomination gets the support. They have to support Lamont. That Lamont won is not a large surprise; primaries are more of an activists election. The moderates come out in the general election, which Lieberman will win if he doesn't withdraw or make any huge mistakes.

Captain's Quarters agrees with me, but furnishes more detailed reasoning. The activists wanted to make it a referendum on George Bush, who never came within 10 points of winning Connecticut in either of the elections he did run in.

Time with more on why Lieberman's loss is good news for Republicans.

More on the subject from Real Clear Politics

Moderate Voice has a slightly different take, and in the same post, an awe-inspiring roundup.

If Daily Kos crows any louder, The Fenris Wolf of terrorism will break lose from his bonds and run rampant over the world while the Midgard Serpent of self hate nibbling away at civilization from within will devour the World Tree. Oh, wait....

On the other hand, the good news is that the Democratic party also won a big one by ridding itself of Cynthia "Racist" McKinney.


via Powerline,

Vital Perspective is passing on an Israeli Television report (passed along by Washington Post, that

Iranian soldiers have been found among Hesbollah combat dead.

Captain's Quarters with more details and a bit of strategic thinking.

Okay, you might expect a Real Estate Agent to have a post with that title, but I'm going to surprise the doubters by hauling out a spreadsheet and proving it with numbers.

The fact is that if you have moderately decent credit you can qualify for 100 percent financing. The more you have for a down payment, the better your interest rates and the lower your payments, but even so, you can make it.

The first thing to remember is that you have to live somewhere. When you buy, you place your cost of housing forevermore under your own control. Inflation means nothing to the housing costs of someone who's already bought. Rising rents means nothing - unless you've bought an investment property to rent out, also. We are currently facing a period wherein rents are likely to rise precipitously. Why? Low vacancy rates (3.4% in San Diego), and many landlords facing adjustable rate mortgages that are going to adjust upwards. It doesn't matter that your landlord has been nice up to now. They were banking on selling for a profit and right now, they can't. When the monthly outlay goes up, they're going to raise the rent. They will get it, too. If you won't pay it, someone else will.

Once you have bought, you step off of that one way escalator of rising rents. Rents increase at a yearly rate about comparable to inflation in most cases, and rents never drop. I have never heard of a rent decrease except in areas that were so far gone they might as well have been war zones. You only borrowed $X when you bought, and unless you take cash out (which is under your control) you should never owe more money next year than the previous one.

So buying stops your situation from getting worse. What about making your situation better? First off, I need to observe that with rising rents, your situation will always get worse until you do buy. But buying really does make your situation better. Not immediately; there's always a hit for buying, and it always costs money to sell. But within a couple of years the average person will be above any reasonable return they can earn any other way, and the reason is leverage.

Fact one: you always need a place to live, and the options are to rent or to buy. Renting typically requires less cash flow, but returns nothing. Once you have bought, all that lovely appreciation belongs to you and nobody else but. Let's look at an actual scenario for San Diego, one of the highest priced places to buy.

I looked at one particular property earlier today with an asking price of $450,000. We're going to leave aside the issue that with the market as it is, $410,000 would be a really terrific offer, and use that $450,000 asking price. The most comparable rental in the area is $1700 per month. For people with dead average national median credit scores, I have 6.125% on a thirty year fixed rate loan for the first 80% of the loan, and 8.75% on the second mortgage. Yes, I'm assuming a 100% loan. Total loan costs, one point and approximately $3400 in closing costs. With sellers outnumbering buyers 36 to 1 right now, it's an idiotic seller who isn't willing to pay your closing costs. Your payments on the two mortgages are $2187 and $708, respectively. Call it $2896 with rounding. I'm going to assume you're married, which means you get a $10200 standard deduction on your federal taxes for 2006. Furthermore, property taxes are about $470 per month, and homeowner's insurance costs about $110 per month for an HO-3 policy, the best there is. Total cost of housing: $3476 per month. Over twice your cost of renting, yes. But $400 of that goes straight into your own pocket, in the form of principal you're paying off from month one. Furthermore, $2960 per month is a tax deduction, from which you'll get a benefit of $(2960*12)-10,200 (standard deduction), or slightly more than $25,500 per year, from which someone in the 28% tax bracket will see a tax reduction of about $7145, returning another $595 per month to your pocket. $3476-$400-$595=$2481 net costs per month to own that property. Less the $1700 rent, works out to $781 extra you're spending. Furthermore, if you turn right around and sell it, you're going to be out about 7% of that sale price. Assuming it's the same $450,000, that's $31,500 you're down.

However, property values don't stop rising just because the renters of the world would like them to. Let's assume you're going to make a slightly below average for this area 5% per year in absolute terms - not inflation adjusted. Most of California has been averaging seven percent per year for the long term, over cycles and cycles of pricing. The CMA for the first property I bought, at the peak of the last cycle fifteen years ago says $320,000, an 8.8 percent per year average increase. So 5% is definitely on the low side. Let's assume you have a twin who continues to rent, and invests that $781 per month, tax free, while you take it and buy a property. Actually, let's go ahead and give your twin the full net cash differential of $1143 per month.

One year later, he's got about $14,400, while your property is worth $472,500. You've got about $27,000 in equity. On paper, you're ahead of him, but remember that real estate isn't liquid and there are always selling expenses. You're really still down by about $20,000 as opposed to your twin. Darn! Just when you had a really good brag going. But wait! Now your twin's rent is raised to $1768 - right in line with 4% inflation. But your mortgage costs are fixed.

Run it out another year. Your twin has about $29,700 in that account. Looking pretty good, right? Well, you've now got a value of a little over $496,000 and you have about $56,000 in equity. You're not really ahead yet, but deducting the 7% costs of selling net you about $461,400. You've made over $11,000, net, not counting the equity you paid down! But your twin has almost $30,000. Why is renting for suckers, you ask?

Go out one more year. Your twin's rent has gone to $1838 per month, but even so his investment account still has a tad over $46,000 in it. Looks like he's pulling away! Or is he? Your property value has gone to almost $521,000, and you only owe $434,000. You're up almost $87,000, and even allowing the standard 7% for costs of selling, you're would now have over $50,000 in your pocket, several thousand dollars more than your twin.

Every year from then on, you pull further ahead. After ten years, when his monthly rent is over $2500 per month, you've got $350,000 in equity, and even after the costs of selling, are over $100,000 ahead of your dimwitted twin.

Lest you think that if your twin started with $45,000 due to a ten percent down payment it would make a difference, the answer is not really. It cuts the lead, but not the essential facts. I could cut the rate on the second mortgage a bit, but let's leave it at 8.75% for the purposes of this exercise. True, after three years you're still lagging your twin in this scenario, as that investment account is $95,000, but only by a few hundred bucks. Your equity is $130,000, of which $94,300 would be left after the expenses of selling. After ten years, he's $80,000 behind you, net of the cost of selling.

Suppose you start with a full 20% down payment? You're still $55,000 net ahead of the game after ten years. Your twin started with $90,000 earning ten percent, but not only do you not have that expensive second mortgage, you've got $450,000 earning 5%, and it's all yours and then some. This is the concept of leverage. That loan turns out to have been a good thing, as it enabled you to leverage your down payment into a much larger appreciating asset. So you only earned half the return - it was on five times the principal! It translated into a much bigger number. By the way, your twin only has the edge on you in cash flow by about $120 per month at this point, and he's going to be negative next month.

Now the real estate market doesn't earn nice smooth returns like this. Neither does the stock market, or anything except maybe bank CDs or the money market, at a fraction of the return illustrated here. Furthermore, it reliably and unavoidably takes about three years to come out ahead on a real estate investment. There are always the twenty percent per year markets, but those don't happen very often and never predictably. What I'm talking about are is making money in the slightly below average market years also. Note that you'll still make twenty percent in the years the market does. Sometimes you get lucky. But "time in" is so much more important than timing that they don't even play in the same league.

You don't have to be a genius, you don't have to have perfect credit, and you don't have to make a mint. You do have to pick properties that you can afford to make the payments on, and you do have to make the decision to accept a couple of tough years for cash flow. There just is no avoiding this hard fact. There are loans that promise otherwise, but they have bitten everyone I've ever met who tried them. Once you have made the decision to accept those lean times, however, the good times seem to flow from them for the rest of your life. The sooner you make the choice to accept them, the better off you will be.

Caveat Emptor.


In the interests of fairness, I've also written a companion article, When You Should Not Buy Real Estate

Carnival of Liberty


Oh my. Lieberman Campaign Says Web Site Hacked

If this is true, this is not only a new low on the part of the NutRoots™, but also what may be the final nail in their coffin. Who wants to be publicly associated with a "dirty tricks" squad? It was one of the things that cost Nixon his presidency.

Mind you, if they're called on it they're going to plead "tu quoque!", but even if that accusation is true, a charge I do not concede, 1) That is no excuse in the eyes of the law or the public, 2) There's a major contextual difference between covert and deniable and overt and blatant 3) Anyone doing political business with them will become the US equivalent of a Hindu Untouchable. If it makes the difference, and Lieberman loses any kind of a close race, look for it to save his political career (It's possible but out of character that Lieberman arranged it himself). Finally, Lamont may become forever known as the guy who threw a safe senate seat to the opposition.

Kos is attributing it to incompetence (on the part of Lieberman's campaign webmaster, of course!) but the comments waste no time going on a counter-attack. Or a follow up to the original attack, depending upon how you're interpreting it so far. I'm certain the investigation will reveal the facts and I'm prepared to wait.

DU is in full hue and cry

Another DU person.

I don't have the technical competence to know if this is believable or not. But the ad hominem is a little thick on that, don't you think?

Decision '08 notes that the hosting service is saying that Kos' facts are in error.

I'm just going to sit here and eat my popcorn and watch the Democrats self destruct, whether this accusation is true or not. Pity, though I'd really rather they didn't. It takes time to build a nationally competitive party, and I'd really rather the Republicans not have 2 to 4 years all their own way.

Looks like Decision '08 is also fact checking Jesse Jackson. Talk about the labors of Sisyphus.

Irish Trojan has some technical details (via Michelle Malkin)


Stuff like this is the main benefit to the public of Realtors associations: California SB 521 would impose a per page "fee" for document recordings They're painting it as a transfer tax to get the membership to understand what's in it for them, but loans are the thing it would really make it difficult for. Want to have to pay higher fees in order to record your loan documents? Vote for this bill! Otherwise, you probably want to oppose it.


Classical Values has a nice article on why you shouldn't trust Wikipedia on partisan matters.


Eek! Wizbang notes that 11 Egyptian students have gone missing from their supposedly planned classes at Montana State, and also links to a reminder that an Egyptian militant group had joined al Qaeda.


Over at Huff'n'Puff, Greg Gutfeld skewers the Donkeys. The comments illustrate how right he is.


Tigerhawk on Human Rights Watch, an assessment I share.

This is one of those commercial gambits I keep seeing that has nothing intrinsically wrong with it, and yet it is most often a tactic employed by the more costly loan providers. In short, sharks and scam artists.

The basic come-on is this: Loan provider offers to pay for your appraisal if you do the loan with them. They often use such come ons as "free appraisal!"

TANSTAAFL. Repeat after me. TANSTAAFL. There Ain't No Such Thing As A Free Lunch. "Free" stuff has an ugly habit of being the most expensive there is, and this particular come-on is no exception. Offer you a few hundred with the left hand while picking multiple thousands out of your pocket with the right. If you want to be an educated consumer, engrave TANSTAAFL upon your soul.

What's going on here is that they are trying to make it look like you're getting something free. You're not. They may front the cash for the appraisal, but in all but a few cases you're going to get explicitly charged in the end. Even for those people whose final loan papers does not show an appraisal charge, they are charging it to you somewhere else. Odds are that they're charging it about ten times over somewhere else. Either in origination or yield spread, one way or another you are going to pay for this appraisal. Actually, you are likely going to pay for that appraisal several times over. People are strange about cash. Many folks, if told they don't have to lay out $300 to $500 for an appraisal, will choose loan providers where the proposed rate is 1/4 to one half a percent (or more!) higher than competing loans, with closing costs thousands of dollars higher. They are getting the cost of that appraisal all right. In this scenario, they're making half a point to one point more than anyone else on the same loan, plus all of the extra closing costs. That's if they're a broker. If they're a direct lender, the difference is between a point and a half and two and a half points, more if there's a prepayment penalty!

Low cost loan providers do not pay for your appraisal. The loan providers who pay for the appraisal are paying not only for your appraisal, but the appraisal of all the people who cancel, and a good margin besides. Not to mention that this loan provider completely controls the appraisal, leaving them in control of what happens if you actually notice their huge fees when you go to sign loan documents, and decide you want to go somewhere else. This is one of the ways that loan providers avoid competing on price, by pretending to give you something for free. I say "pretend" because they are not giving you anything for free. I do not understand that normally competent adults who are well aware what "free" really means in other contexts will think it means they're getting a benefit. But just like the "buy one, get one free" offers that jack the price up threefold first, this is only a good bargain if the few hundred dollars it saves you stays saved, rather than giving you $400 with one hand while taking $6000 with the other, through higher loan rates and costs. Rate and cost trade-offs on real estate loans vary constantly. You can't know what the best bargain is right now unless you price it out right now.

Caveat Emptor.


Carnival of Personal Finance Recommended: Roth and Company (some good observations on the tax code)

RINO Sightings

Carnival of Real Estate

Carnival of the Capitalists Recommended: David Maister


After 17 straight rate hikes, Fed weighs a pause

This is about a percent and a half too late. But Bernanke, like Greenspan and the rest of the Fed's Board of Governors, are bankers first. Bankers have a phobia about inflation. It has a rational reason, but they still over-react to inflation threats almost religiously. If I were a senator sitting in judgement on a BOG nominee, I'd want to be convinced that the nominee wouldn't overreact to inflationary pressures. That seems to be the number one problem the fed has.


Feds ordered BP to inspect pipeline. As bad as a planned shutdown is, can you imagine how bad an unplanned shutdown would have been? Not to mention the ammunition a pipeline failure would have given the anti-exploration and anti transporting and just plain anti-everything wing of the environmentalists? Even though this has caused about a $2 per barrel price hike, this is not just an ecological disaster aborted, but political and economic as well.


I've been waiting for this: Condo conversions turn into reversions

People are buying conversions to rent them out, and others that were bought or built as planned conversions are being delayed.

With a local rental market that has a 3.4% vacancy rate, expect demand for rental properties to rise, as well as rentals. This is going to have two effects: Stabilizing the purchase market, and raising rental rates as people need to cover those mortgages charge more. With a 3.4 percent vacancy rate, be assured that they can. The time to buy is now, before rents start rising and while there are still 36 sellers for every buyer.


How bad is the fiscal state of our country? USA Today tells is something closer to how it really is.

I have long said that if this nation were required to produce audited annual financial statements like most corporations, we'd have an armed rebellion. Lest you think that's a bad thing, it's not. The sooner we get away from the ideas infesting our current spending policies, the sooner we can stop digging this hole we're in deeper.

HT: Balloon Juice


Tomorrow is the Connecticut primary that doubles as the battle for the soul of the Democratic party. Joe Lieberman, a left winger willing to vote with centrists when clearly in the best interests of the country, or Ned Lamont, who like most of the NutRoots™, basically hates George Bush, or at least is willing to pretend that he does. I've said all along that if Lamont wins, it will be indicative of the impending failure of the Democratic party to be able to compete on a national basis. Last report was that Ned Lamont was up by six points, but due to Lamont being caught in several obvious untruths, Lieberman was coming up fast.

Scrappleface has the optimum strategy.

Buyer's Markets

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One of the phenomena that I am encountering is fear of the market in buyers. They are concerned that prices are falling, and that they will lose some or all of their investment.

Well, the first thing to understand is that buyer's markets are not the time for "flippers". You are not going to buy the property and make a profit after the expenses of selling in six months. That's a seller's market, and we don't have that now. Two years ago, most prospective buyers were using the f-word. Now, those people who were buying to flip are caught flat-footed by a market that has turned, like deaf kids in a game of musical chairs. The signs were there, but they were just a little too greedy.

Nonetheless, a buyer's market is the best time to buy for everyone else, and here's why: Inventory. Turnover Rate. Market Saturation. Supply and Demand. Instead of being the kings of the world, sellers have now turned into the beggars. The ratio of sellers to buyers locally is approximately 36 to one and climbing, as 960 properties were listed but only 397 purchase agreements were reached last week. Imagine you're in an environment where there are 36 people of the opposite sex for every one of yours. I'm assuming you're interested in the opposite sex, but even if you're not, you should be able to understand the implications. That one woman with 36 men to choose from is going to be able to get just about anything and everything she wants. Even the woman who would be completely ignored in other circumstances is going to have multiple, attractive suitors. Alternatively, the one man with 36 women to choose from is going to end up pretty darned happy, even if he is short, fat, ugly, middle aged and balding.

Now the sellers in this market don't really have the option of choosing other sellers, as it doesn't help them. They have real estate, they want cash. Just like how that short fat ugly balding middle aged guy does pretty well for himself when there are 36 women for every guy, so does the buyer who has cash, or can get it via their power to get a loan.

Prices are likely to drop for a while, but you will never again have this ratio of sellers to buyers, and the market could turn at any time. If you wait for the market to turn around before you put in a bid, you will be much less sought after. Right now, the power of the market puts buyers in control of the transaction. If this seller isn't quite desperate enough to do what you want them to, the one down the street or around the corner is. Like the 36 men to every woman scenario, if this man isn't able or willing to meet the woman's full wish list, she can move on to someone who is.

Buyer's markets don't last long. The last one was less than a year, and only about two months that buyers had the power that they do now. If you buy for a little more than market bottom, so what? The only time value of the property is important is when you sell and when you refinance, and I've already told you this is not a flipper's market. But once other potential buyers get the idea that there are bargains to be had, they will come out of the woodwork, and the vast majority of your purchasing power will be gone when the ratio of sellers to buyers drops to four to one. And soon after that, they turn back into seller's markets. When that happens, watch the prices - and the profits - shoot back up.

Miss the window now, and you'll pay for it later. Any market is always most lucrative when everybody else wants to do the exact opposite of what you're doing. Pick and choose your properties with care, and you will do very well when the market turns, whether that is next month or next year. Right now, you have your pick of sellers, and your pick of their properties, and the leisure to consider. When the ratio of sellers to buyers drops, it gets much harder to find these kinds of bargains, and much harder to get in before someone else has locked it in by getting an accepted offer.

Caveat Emptor.


It appears Reuters has been running a heavily photoshopped photo of Beirut while claiming it was unaltered.

LGF was the earliest to cover it that I'm aware of.

Preofessional photographers talk about it here.

LGF has a little fun with the concept.

Jawa Report finds another doctored photo.

Michelle Malkin has an excellent roundup.

Unfortunately, lies get around the world before the truth gets its boots on, as Captain's Quarters notes some serious inconsistencies and omissions in reporting.


Iran tries to obtain Uranium 238 from the Congo

From what I remember, U238 has to be converted to Plutonium to be useful for atomic weapons, but that's fairly easy to do. Alpha particles.


More doings in Yemen: Armies of Liberation covers the Yemeni president emphatically taking the terrorist side. Meanwhile, Seven convicted terrorists escape prison. The FBI expects them to head to Lebanon to fight Israel for some reason...


Captain's Quarters has a great post on Lieberman with which I agree. He has been the agent on compromise, the man with the integrity to vote his conscience. I usually do not agree with his conscience, but I greatly respect his integrity.

The reason he's been thrown under the bus by the NutRoots™ is that he is an effective agent of compromise, and they want no part of compromise. They want no part of anything that does not agree with their positions completely. He also represents a very blue state, and the chances of a Republican winning the election are basically non-existent, giving them an opportunity to do this without additional apparent consequences.

Unfortunately, when you interfere in the race of someone with a national presence, you're going to reap consequences. Right now, moderates in purple areas nationwide are taking note, and not liking what they see in the NutRoots™.

US News and World Report has a spread on the real estate and mortgage market in which they catch the state of the market as it was about a year ago and completely miss out on missing the mortgage products that enabled it to get this far out of hand. They mention short term interest only loans, but completely ignore the prevalence of Negative Amortization loans, which are doing more damage than interest only loans ever thought about doing. They mention how many folks are renting, but fail to project out the individual financial consequences of the decision to buy or rent. I wrote an outline for an article titled "Why Renting Really Is For Suckers (and what to do about it)" last week, but maybe I should move it to to the front burner.


Shameful. US troops shot detainees in cold blood.

I never served in the military, but I'm an American, and I'm ashamed of these people who evidently abused their position. If they are convicted, I want them shot. Abuse of position makes any crime worse. I'm sure a couple of the miltary folks on my sitelist will have a lot more to say, better than I could, because I've never been in that position.


Castro said to be recovering, US says no invasion

My condolences to the Cuban people on their continued oppression, but I don't think a US invasion is necessary. Make dissent safe, and the Cuban people and their relatives in the US, who have gotten used to real democracy, will take care of the rest.

Raul Castro, 75, lacks the charisma of his elder brother, who turns 80 on August 13. But some Cuba watchers believe he could open up Cuba to Chinese-style economic reforms of the sort long resisted by his brother.

I think this writer is fooling themselves. I can think of a lot of promised liberalizations in the last forty years after one despot or another died, and the only time it actually happened was in Spain after Franco, and Franco had taken steps to make sure it happened after his death, before he died. In the present instance, I only need point to the fact that it was Raul who recruited Che Guevara. Anyone who'd work with that murderous thug is not likely to be a closet democrat or free market sponsor.

When there is solid news about Castro, look for Val at Babalu Blog to make sense of it.


A while ago, I posted about My thoughts on the Israel Lebanon situation and said the following:

Exterminate Hesbollah. I can hear the shocked gasps from here. Well, screw that. There is no moral equivalence here. Israel has shown itself willing and able to abide by agreements that it's negotiating partners live up, or even sort of live up to.


Yes, it bothers me to see kids killed in the exchange of hostilities. It bothers me severely. But I put the onus for that squarely where it belongs, with Hesbollah, who hides in their midst, shoots out from groups of civilians, and hopes and prays that Israeli answering fire kills some "innocent" children and women and old men

Cases in point: Q and O about the principle of Double Effect in Just War. Read The Whole Thing.

Moshe Yaalon in the Washington Post

Hezbollywood Horror: "Civil Defense Worker" doubles as Traveling Mortician

neo-neocon on the former Isreali "peace mothers"

Big Pharoah "Even if it were to fall on our heads, it wouldn't have spoiled our joy." about a Hezbollah rocket that hit the Palestinian city of Jenin. Didn't I say something about "the Islamists and other people think Death to Israel is more important than Life for their islamic co-religionists"?

Augean Stables in the same vein

Cry to those using babies

Victor Davis Hanson on the refusal to confront. Then and Now.


Iraq the Model on Iran arming Iraqi death squads: "Why is it difficult to demonize a demon?"

I wish I knew.


Michael Barone looks at the end of slavery. The Dead White Men don't come out looking completely evil.


Traffic in July set a new record again! 137,987 visits, 312,693 page views! It would have been even higher except that my server lost the records for three days. Running totals: 645,173 visits,1,795,048 page views.

Thank You all for stopping by!

Sorry about low article count this week. It may have to continue into next week. I have not yet had a chance to write new articles for next week.

Keeping Silent

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Via Politburo Diktat, Ace of Spades has a good explanation for the terminally outraged on how the government is sometimes not lying to you, it's lying for you.

But I do think one of his examples was weak. Not the Chinese Embassy stuff, that's spot on. But anybody with any intelligence or exposure to banking records requirements knew the government tracks financial records extensively. It's how we catch mobsters, drug traffickers, etcetera, and how we have been catching them since the 1930s. The government doesn't publicize it, but if they ever said, "We're not doing it," I must have missed it. They simply didn't draw any attention to it. Just like there are ways people in certain high-risk occupations have of letting people know that There Is A Situation But I Can't Say So Openly. Many of these are found in publicly available, completely unclassified documentation, others are things that everybody in the business knows. However, you don't see them splashed on the front of the trade publications. To coin a completely bogus but plausible example of the sort that are used, "If your auto dealership is taken over by terrorists, fly double pennons! The Police know that's what it means!" If the New York Times or other media publicized these methods, those these methods are meant to guard against would be able to take precautions, and sometimes there just aren't a whole lot of means available. If the network news said, "A Police SWAT Team was able to deal with Al-Qaeda taking over the grounds of Joe's Discount Car Sales in Podunk today. Forty-three terrorists were killed without civilian injury. They discovered it unbeknownst to the terrorists when an alert Police Officer, Mr. B. Anonymous, noticed that the employees at Joe's were flying double pennons, a universal signal that car dealerships are being controlled by terrorists." Add that to the standard camera shots, and every terrorist from now on is going to know that double pennons mean the SWAT team is going to come, and there are only a limited number of such signals possible.

It's not that the government said that bank records weren't being monitored. That would have been a stupid, obvious lie. Of course bank records were being monitored. They've been monitored for seventy years. But sometimes, if you just don't bring something to your enemies' attention, they forget about it. Or maybe nobody ever told them in particular. Or they just don't realize that this is important information, they don't worry about it, and pretty soon, their arrests are announced. Kind of like a combat ambush but better.

Publicizing these methods means that they are not available or won't work. The enemies of civilization will take precautions so that they don't get caught by them. And that is precisely the crime of the media in the banking records brouhaha. They reminded those whom the methods were being used against them that these methods existed, so they could take precautions against them. I think the War on Drugs is a stupid worthless counterproductive waste of resources, but given that I can't change the fact that we are fighting it, finding drug traffickers through financial records sure beats no-knock raids. I'd rather not be fighting the War On Terror, either. But given that we are in it whether we want it or not, I'd rather discover terrorist plots through their financing before the fact than during, when they and the enforcement types are spraying bullets everywhere and bystanders are likely to get hurt, or afterwards, when all we can do is pick up the debris.

Today's Turkey

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Over at my other site, I've got a feature called "Hot Bargain Properties" Being as the market is swinging more strongly to the buyers every day, it's what you might call a "target rich environment". On the other hand, there are still folks in denial, and just plain "What were you thinking" moments. Since a typical realtor won't talk down anything, no matter how ridiculous, I thought I'd post one of those. The format is similar to my Hot Bargain Properties posts.


General: East County, 3 Bedroom, 2 Bathroom Asking price $575,000.

Why you should be interested: You shouldn't. Nobody should. It's a nice house, and if it were somewhere else, it might be worth every penny. But here it is an uninhabitable waste of property tax money every six months. At $575,000, that's roughly $600 per month, $3600 spent twice per year.

Selling Points: It's gorgeous on the inside. Spacious rooms, beautiful kitchen, nice brand new carpet. The whole property is basically brand new. Pity that ten feet outside your front door is a neighborhood that looks like it came from Deliverance. I haven't seen the inbred mutant banjo player yet, but I keep looking every time I drive through on my way to something else.

Why I think it's a potential bargain: I don't. If somebody gave me this property, I'd give to some charity or deed it back to the county immediately. Less trouble than trying to sell it for $1, or finding a deaf person who wants to buy it. The only way you might be able to live here is inside a hundred foot deep multilayered bunker.

Obvious caveats: The fact that it's less than a quarter-mile off the departure end of the main use runway of an airport might be something you'd like brought to your attention, as if you wouldn't know immediately. I don't know how they sold the other homes in the development. Maybe the wind had shifted on that day and the planes were using the crossing runway. I don't know why I wasted pixels taking a picture, but I had to wait for a Piper Cherokee to clear the picture window. It filled the whole thing. I love small planes, but there is no way I could stay here one night. The noise was bad enough with just the little trainers that were hopping around the pattern. This airport gets some fairly large aircraft and corporate jets, and has a regular traffic in retired World War II planes (and older!), all of which are noisier than most people would believe. I worked at that airport, and I know of two crashes in the field that used to be where this development sits. Just a matter of time before someone falls out of the sky on one of these homes.

Why it hasn't sold already: Left as an exercise for the reader. Actually, it's a private sale, not from the developer, so it did sell once. Go Mark Twain one better. Idiots. School Boards. The owners of these. I'd say two better and name the developer, but evidently the universe developed bigger idiots. Or a bigger fool. You can look out the window at runway centerline, for crying out loud.

If you keep it ten years and it averages only 5% annual average appreciation per year: Based upon a $575,000 asking price, this property will be worthless.

Fact you should be aware of: Open your eyes and look around. Feel the vibrations from the aircraft overhead! Reach out and touch one! (Actually, please don't try. You might be able to!)

Obvious way to enhance value or appeal of property: Getting rid of the airport would be one, but I know the provenance of that airport land. Isn't going to happen. The county not only makes a mint off of that airport, but in order to close it they would have to pay the federal government at least billions and I believe tens of billions of dollars. Not. Going. To. Happen.

I'm a buyer's agent, so I'm not afraid to make fun of stuff like this. If this owner came to me to list it, I'd probably make like one of Ted Striker's seatmates in Airplane!

Don't call me on this one. Please, I'm begging you. Properties like this are a Realtor's version of Slasher movies. You're stuck in a roomful of rabid dogs sharks lawyers and their idiots shills clients, and nobody else gets out alive!

Caveat Emptor, for the love of humanity!

UPDATE: I forgot to mention that they are building a freeway that will come within one block of this property!.

For being the most popular investments in the country, many people have a "black box" picture of mutual funds. Money goes in one end and more money (usually) comes out the other.

Mutual companies in general are a very old concept. The Egyptians had them in ancient times, mostly for insurance purposes. For one time investments, they go back at least to europe in the middle ages. But it wasn't until 1924 in the United States that somebody had the bright idea of making it a continuing thing, an actual business planned around the continual making of communal investments. (The very first mutual fund is still going, by the way, as a member of one of the bigger advisory fund families.) Regulation of mutual funds and similar entities dates to the Investment Company Act of 1940.

The basic concept is this: A group of people get together and pool their investment money, and invest it as a group. They all own a portion of the entire pool of investments.

This buys a lot. It buys economies of scale, as the costs to trade 10,000 shares are significantly less than 100 times the cost of trading 100 shares, and way less than 10,0000 times the cost of trading a single share. It buys instant diversification, as the group has plenty of money to split among enough investments so that the failure of any one will not unduly hurt them. It buys (theoretically) top tier money management, because there's enough money in the group such that the cost to pay such a person isn't prohibitive, as it is to average investors on their own. Furthermore, there is no need to purchase an even number, or even an integer number of shares, so you can invest any amount that is at least whatever minimum the group agrees upon. You can typically buy mutual fund shares in increments as small as one one thousandth of a share, so if you want to invest $507.63 exactly, that's not a problem as long as it's above the minimum investment, or minimum additional investment, whichever is applicable.

Because there are costs to the group associated with adding a new investor or making a new investment, they do have rules about minimum initial investment and minimum additional investment. For some "no-load" funds, the minimum investment can be several thousand dollars. For advisors funds, where there is a sales charge, the minimums are typically smaller, something along the lines of $250 or $500, as the sales charges discourage short term trading. Indeed, some of the advisors funds will accept initial investments as small as $25, as long as you agree to monthly investments.

The math of mutual fund share price is mostly important to the accountants, not the investors. Initially, it's quite arbitrary. There is a given pool of investment dollars, and the group, or investment company, decides that share price is going to be $10.00 or $25.00 or whatever. Note that, with mutual funds, there is no practical difference between $1000 buying one hundred $10 shares or forty $25 shares. It's just a matter of record-keeping. There is a minor record keeping argument for setting initial share price low, but it's mostly important for record keeping.

During each trading day, the number of shares is kept constant. Whether or not there is any trading activity, any new investment, or any redemption, the number of shares stays constant until the end of the trading day. At the end of the day, the fund computes the value of the underlying investment, divides by the number of shares for that trading day, and that becomes the share price. At this point, the end of the trading day, any redemptions or new investments take effect If someone wants to redeem a given number of shares, the company sends them share price times number of shares. If someone wants to redeem a given amount of money, the fund divides that by the share price and redeems that number of shares. If someone invested money in the fund that day, the purchase takes effect at the end of day price. You can buy a given number of shares (providing you sent them at least enough money) or, more commonly, you can invest a certain number of dollars, which will be divided by the share price to calculate the number of shares you bought. For these reasons, among others, short-term trading mutual funds of any sort is a pointless way to waste money, and Exchange Traded Funds are a method for extorting money from the gullible (If you must day trade, S&P and similar option based alternatives are superior). Mutual funds are for investors who intend to hold for a while.

As time goes on, there are several sorts of events that influence share price. First off, that the underlying pool of investments fluctuates in value, going up and going down with supply and demand. This happens whether that investment is bonds, stocks, or both. Bond prices and stock prices change every day, with supply and demand and market conditions. Always, within a given day, the number of shares in the fund is constant. At the end of the day, the effects of the market and any trading the fund did are taken into account, and the end of day share price is computed, and all of the day's transactions in shares take place at the end of the market day. In order to be processed by the fund on that day, any orders to buy or redeem shares must be received by the fund prior to market close, or they get the next day's share price. There have been people criminally convicted and sent to jail on this point, for gaming the share price.

The second thing that happens to influence share price is income. Every so often, one of the fund's underlying investments will pay a dividend (stocks) or make an interest payment (bonds). Each one of the fund's shares (not shareholders!) is entitled to an equal share of this money. Say that the fund gets a million dollars over the course of a certain period, and there are ten million shares outstanding. Each of the shares will get a payout of approximately ten cents. I say approximately, because there are other concerns involved. Now, because this money has been received over a period of time, and until the payout was included in the overall value of the fund, the price per share will be reduced by whatever the payout is (and all funds hold at least a small amount of cash). So if the price per share was $15.00 before a $.10 per share payout, it will be $14.90 afterwards. Some shareholders will have elected to receive income in cash, and some will have elected to have it automatically reinvested (each share's payout purchasing 1/149th of a share in this example), but in either case, this has tax consequences for the investors unless they made their investment from within a tax deferred account such as an IRA (among many others), and the money remains within that account.

The third thing that has an impact upon share price is capital gains (and losses!). If the fund invested $1 million by buying 50,000 shares of ABC company at $20 per share, and ABC company goes to $30 per share, the value of those shares has increased to $1.5 million. So long as the fund management holds onto those 50,000 shares of ABC, it's just a paper increase, and if there are ten million shares of the fund outstanding, that means that each share of the fund effectively owns fifteen cents of ABC, and five cents of that is an unrealized gain.

But let's say that the share price of ABC goes to $50 per share, and the fund management decides that it's time to sell those 50,000 shares. Now they sold for $2.5 million, and of that, they cost $1 million to buy (This is usually stated by saying that those 50,000 shares had a basis of one million dollars) But the remaining 1.5 million dollars is profit for the fund. If there are still ten million shares outstanding, that's a 15 cent per share capital gain. Assuming there are no other capital gains or losses for the period, the fund declares a fifteen cent capital gain. Just like income received, if the share price was $15.15 before, it will be $15.00 after. Some investors will have chosen a payout, and some will have chosen to reinvest. The ones who have chosen a payout will get a check of fifteen cents multiplied by however many shares of the fund they own, while the ones who have chosen to reinvest will each get one one hundredth of a share per share they already own. Whichever they have chosen, unless the investment comes from and remains within a tax deferred account such as an IRA, there will be tax consequences for the individual investors.

Most mutual funds are not "stand-alone" investment companies. They are members of a family of funds, theoretically investing only in a particular investment niche. This allows the entire fund family to amalgamate their marketing efforts and administration. Particularly with advisory funds, most investors should find a single fund family that meets their needs to stay within, in order to minimize sales charges. The family may or may not have input as to a given fund's management team. Nonetheless, each fund has its own board of directors, and there is not usually anything legally binding a particular fund ("investment company") to a particular fund family if the investors and fund management really want to leave.

Now there are some potential weaknesses of mutual funds. The fact that there are tax consequences for investors is not an issue while still holding most other sorts of investments, at least not to the same degree. So most mutual funds find themselves with incentives to do something, or not do something they would otherwise have done, due to tax consequences to their investors. Furthermore, most mutual funds are way too dilute. The optimum number of investments, according to mathematical models, is between twenty and thirty, and given that the overwhelming majority of investors who invest in mutual funds have invested in several different ones, a smaller number of investments per fund is more appropriate than a larger number. It being that time of year right now, I just got a statement from one of my funds listing over 400 holdings. There are reasons I continue to invest in that fund and that family, but I'm certainly not happy about that aspect.

Nonetheless, even with these weaknesses, a mutual fund's ability to deliver immediate diversification, economies of scale, and professional management with only a modest investment, well within the capabilities of beginning investors, are excellent reasons why most investors should strongly consider them as an investment vehicle, especially starting out. That they are also very liquid, and not subject to large purchases and redemptions significantly influencing share prices, can give even a large investor with "high risk" predilections reason to park money there for a time.

Caveat Emptor

Sooner or later, a pretty fair proportion of the population are going to get an offer for a much better job, but the catch is that job is located in another city on the opposite end of the country. What are the major issues relating to the mortgage?

Well, first off, the relocating spouse may not have the job until they actually report for their first day at work. Many times people are told "Go there and you'll have a job," and when they get there, they don't. So no matter how much time you have in that line of work, until you actually have the job things are iffy and you can expect loan underwriters to reflect that. The job offer letter may or may not get the job done - it usually doesn't. Usually they want at least an employment contract, sometimes (particularly A paper) the first pay stub as well. It can be rough, and a waste of money to rent, but over the lifetime of a loan with a higher interest rate, it may pay off to actually wait until you've got that first pay stub.

Now just because the one spouse has a job offer doesn't mean the other spouse will get a job in their field. Sometimes they work in a field where there is no problem finding work, like health care. Sometimes they work in a field where moving means they don't have a career, and they're going to have to start all over in some other field. If you worked in a distillery and you're moving to Salt Lake City, you're probably going to need a career change. If that job is similar enough to the one you left behind, that's cool. But if you used to be a bookkeeper and now you're a retail clerk, they you do not have two years in the same line of work. Chances are your family is not going to be able to use your income to help qualify for the loan. They are not going to be able to use it at all until you have a job that has income. Since this can take a while, you really might be better advised to rent for a month or two (or even six, if that's the shortest lease you can find). If, of course, one spouse isn't working and doesn't plan to, this isn't really an issue.

Next, there are the issues with the property in the old city. Many times, especially in a buyer's market like now, the property has not yet sold, becoming a drag upon your ability to qualify for a new loan. If you can rent it, that's certainly one solution, but most lenders will only allow 3/4 of the monthly rent to be used to qualify you for a new loan, but will charge all of the expenses against this. Considering that around here it's tough to get a positive cash flow for a rental property in actual terms, you can imagine how tough it is when your monthly income from the property is chopped by 1/4, and how much more you will need to be making, in order to justify the loan.

Another thing is that most folks expect to be able to use the entire amount of the new salary to qualify, and that's not the way it works. If you made $6000 per month for the past two years, one month at $9000 isn't going to move that monthly average income up very much. The computation is done on a weighted average basis - you've got 23 months at $6000 per month, or $138,000, and 1 month at $9000, which when added makes for a grand total of $147,000, or about $6125. Often newly relocated folks have to settle for sub-prime loans when they are normally A paper so that they can use bank statements or something else to qualify. And of course there is always stated income, but there are rules for that, especially A paper.

Caveat Emptor


"What mortgage fees can i recover after loan denial" was a search I got. The answer is basically, "None."

Indeed, one of your search criteria should be mortgage providers that don't charge anything up front, except maybe a credit check fee. Those are about $20, and you should be prepared to spend that $20 several times over while you're shopping lenders. If you're worried about twenty dollars when you are applying for a mortgage, chances are that you shouldn't apply.

Now many lenders want you to make a deposit that varies from a few hundred dollars to one or even two percent of the loan amount. Deposits are charged by lenders who want to get you committed to the loan, and they do it for at least two reasons. The first is psychological commitment. Usually when I mention things like that, I get people who immediately come back with, "Those kind of mind games don't work with me!" I'm not looking for an argument, and with most folks, I don't know their past history well enough to come up with an example, but this phenomenon is essentially universal as far as humans go, and those few not subject to it are probably suffering from some other more debilitating psychological problem. In fact, the normal progression of a loan is a series of commitments upon your part. The decision to talk to potential providers. The application.

After the application, lenders want the originals of your documentation and money. The original documents are requested so that you cannot shop or apply for a loan elsewhere. I, as a loan officer, do not need your original documents for anything I can think of at the moment. I need the original of the loan application and a couple other items you fill out with me, but not of your pay stubs, your taxes, your insurance bill, or any other documents you have pre-existing. Copies are just fine for any lender I do business with, so long as they are clean and readable.

The next step is to get money out of you. If all they want is the credit report fee of about $20, that's fine and normal. Credit Reports cost money, and if you're just shopping around, a loan provider has two choices: raise their loan prices slightly so that they charge those people who finalize their loans more, or charge folks whatever the cost is to run credit when they apply.

But many loan providers want more than the credit check fee. A lot more. They want a deposit that varies from several hundred dollars to one percent of the loan amount, even two percent in some cases. They might say it's for the appraisal, and usually at least part of it does go to the appraiser. Nonetheless, you should not give it to them. I've had my clients tell me about the tales they've been told, about how that money is to pay the appraiser. The appraisal should be paid for when the appraiser does the work. As I've said before, you want to be the one who orders the appraisal, and therefore controls it. I've had clients tell me about loan providers who only use "in house" appraisers. Well, those "in house" appraisers are drawing a salary and requiring "in house" appraisers is usually indicative of lenders who aren't competitive on price.

The reason they really want larger amounts of money out of you upfront is two-fold. First, it builds that psychological commitment I talked about a while back. Second, it makes you financially committed to a loan, which tremendously raises the level of psychological commitment. It means they've got some of your cash. Most people don't really understand loans, not deep down where it really matters. Consider, for a moment, which you would rather have: $400 cash, or a loan that costs $5000 less (not so incidentally making a difference of $25 on the monthly payment), but is otherwise identical. Dispassionately sitting there on the monitor in front of you, the choice seems obvious. You're going to have to pay that $5000 back sometime, and in the meantime you're paying interest on it. But move it to a situation where these potential clients have already put down a $400 deposit with an overpriced loan provider, and the vast majority of them won't sign up for my loan, even though I'm willing to guarantee my loan quote and the other company isn't willing to guarantee theirs. Why? Because they're thinking of that $400 in cash that came out of their checking account, not the $5000 in extra balance on their mortgage. Companies want that deposit to stop you from going elsewhere, to a loan provider that can do the loan (or, more importantly, is willing to do the loan) for much less money. Practically speaking, they're not only guaranteeing themselves a certain amount of money, they are guaranteeing that the client won't change their mind about their loan.

So do you get it back if the loan is denied? Nope. At least I've never been told about an instance where it happened. That money was a good faith deposit. Legally, it was an incentive for that loan provider to do the work of that loan, all of which costs money. Provably costs money, I might add. The loan processor doesn't work for free. The underwriter doesn't work for free. The escrow officer doesn't work for free. The appraiser doesn't, the title company doesn't. Nobody works for free. Phone calls and copies and word processors to generate all of your documents from the title commitment to the loan documents. Some documents are the same for every loan and can be computer generated. Others, like the title commitment, require humans to enter literally everything on them.

Now, a deposit isn't necessary. In fact, you can find loan providers out there (I'm one of them) who routinely work the whole loan on speculation of it funding. They might ask you to pay for the credit report up front, but everything else is paid for as the work is done. You write the check to the appraiser when they do the work. You might ask the advantages to the consumer of this. That advantage is that these loan providers are not holding your money hostage. This means that if the loan falls apart because the loan provider told you they could do the loan and they couldn't, they're out the money, not you. This means that if you find a more competitive loan, there's no reason why you can't apply for that one instead. This means if your back up loan is ready to go and this one isn't, all you've spent is the $20 for a credit check. You're not out hundreds to thousands of dollars that were in the deposit.

So if a loan provider asks for a large cash deposit up front to begin the loan, chances are that you shouldn't give it to them. Particularly if they won't guarantee their loan quote, chances are they are trying to lock you into their loan by holding your money hostage, and when you discover at closing that they tacked thousands of dollars onto the loan charges that they conveniently "forgot" to tell you about or pretended didn't exist ("Escrow's a third party charge. We don't have to tell them about it until afterwards"), and now you are facing a choice between forfeiting your deposit and signing off on a loan that's not what you agreed to when you gave them that deposit. Better not to face that choice, by not agreeing to pay anything beyond the credit fee up front.

Caveat Emptor.


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This page is an archive of entries from August 2006 listed from newest to oldest.

July 2006 is the previous archive.

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