July 2008 Archives

July 30th, 2008

The guidelines for this carnival.

As always, I arranged the entries that met guidelines into three levels, based upon originality, usefulness to the consumer, and how much thought and effort and research went into an entry.

STRONGLY RECOMMENDED

There were no highly recommended articles submitted this time.

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RECOMMENDED

On the slightly humorous side, Dothan Home Search gives us Three ways to avoid a hassle-free real estate closing. They really do work, and they really do waste money. Anyone want to try for the trifecta?

Your host submits Procuring Cause and Multiple Agents

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MET GUIDELINES

Housing Prices Decline Slightly - A Clear Picture Is Forming is local information for Tallahassee, Florida.

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SPAM AND OTHER RIDICULOUS SUBMISSIONS

A site called "Deposit Articles" solicited for people to write articles for them for free. The carnival wants expert articles for consumers in the subject of real estate, but they want experts to volunteer to write for free so they can get AdSense revenue. Definitely unclear on the concept, as well as being parasitic distractions from people who actually know what they're writing. How pathetic can you get?

A Site named "Discover Debt Freedom" submitted an article telling you to take a vacation in South America. The only mention of real estate in the entire article was a paid shill for a vacation rental site. How in the world vacationing abroad is going to help you pay down your debts is something I can't figure, and the whole thing is completely inappropriate spam anyway.

For those who might object to the treatment their submission received, the relevant information has been in the guidelines since before submissions were being accepted for this carnival. Having been told to read the guidelines, you willingly submitted these posts. Live with it.


Consumer Focused Carnival of Real Estate will return in one month on August 31st, 2008), here at Searchlight Crusade, unless someone else wants to host. Deadline for submissions will be August 29th.

I really would like to move the frequency back up to every two weeks or even every week - but I need to rely on getting about six good submissions per carnival to do that, which translates to about twelve per month to go back to bi-weekly. I'm not going to lower the standards. I want accurate articles worth reading. People will come back for quality.

Carnival of Real Estate (thank you!)

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Video: UPS saves 3 million gallons of fuel by avoiding left turns.

What did I tell you?

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One final book for Arthur C. Clarke, in conjunction with Frederick Pohl.

I'm not much for "Unknown author fleshes out story idea by big name giant" books, but Pohl is a giant on his own, and seems to have retained more of his peak form than Clarke.

The most famous problem in mathematics, Fermat's Last Theorem was finally proven for all cases in 1994.

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Gas under $4 per gallon in San Diego:

crop

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No "Name that Party" mystery here: Ted Stevens indicted, longest-serving GOP senator

By comparison, when William "Freezer Cash" Jefferson was indicted for much more serious crimes, the AP story waited until the 12th paragraph to identify him as a Democrat - once. In this instance, they identify the party right in the headline, and repeat it at least six times in the article, just to make certain you know he's Republican. Just a little bit of uneven treatment.

He is accused of lying on his annual Senate financial disclosure reports between 1999 and 2006 -- an indictment that caps a lengthy FBI investigation that has upended Alaska politics

I don't have any quarrel with the indictment. Stevens is a corruptocrat, much like John Murtha, and Washington would be a better place for their absence. But it would be nice to have equal treatment of the two parties, instead of blatant partisanship from the press.

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Armies of Liberation reports that the Yemeni courts have refused to release Mr. al-Khaiwani but admitted:

Al-Khaiwani was sentenced to six years term in jail over "writing articles against the president and possessing CDs supporting al-Houthi's rebellion and threatening the country's interests".

There is a reason freedom of speech is necessary, and Yemen's corrupt excuse for a government is one of the prime exhibits.

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Richard Fernandez quite effectively questioning some assertions that many have made regarding the war on islamic fundamentalism.

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Top Ten Things The Creep Me Out About Obama

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Last I knew, Victor Davis Hanson was a Democrat, but he's certainly sounding like a McCain supporter here.

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Refuting an anti Obama e-mail

Please, people, the truth about Barack Obama is more than sufficient unto the task. Don't over-exaggerate. You'll destroy the credibility of everyone saying anything vaguely similar - even though they are telling the exact truth.


I had actually started writing this last month, but one of my favorite blogs just ran a picture of a listing sign that included the caption "REDUCED But Not Stupid or Desperate". I beg to differ on the former. On the latter, time will tell.

Most successful real estate investors are really skilled desperation prospectors. They make their money when they buy the property - the actual sale only confirms the success they previously had.

Here's the really good part: Most of the folks they buy from did it to themselves, by letting irrational greed rule them.

For buyers, there are three parts to this game: Persistence, a good buyer's agent, and being willing to move on the the next if this one won't deal yet.

For sellers, there are three failures: Failure to consider your property's real position in the marketplace and price accordingly, failure to consider your resources, and failure to consider your fallback options ahead of time.

The fact is that most buyers shop for homes by the value to them. There may be an explicit budget involved or there may not, but most people have a decent idea of what they can afford. The smart ones shop by purchase price, the silly ones based upon payment. During the Era of Make Believe Loans, many got burned even worse than usual by that, but it's still around. The point of the matter is that if there's a house down the street priced at $350,000, while you want $400,000, you are going to have to convince someone who doesn't have any ego invested in the property that your property is worth the extra $50,000 to them. If they won't willingly pay the extra, you are doing nothing but wasting your time. If, on the other hand, you can get them to pay the $50,000 extra, you have won. But people don't shell out $50,000 extra for stuff that's only worth $10,000 to them. They go buy the other property, and spend $10,000 making it into what they want. This is different only in degree from the folks you see comparing different bottles of aspirin at the supermarket.

So if you're not offering something worth $50,000 extra to one particular set of buyers, you are wasting your time as long as there are any competing properties on the market - and there are always competing properties on the market. Even during 2003 when the average time on market locally got down to about three days, there were properties that spent months languishing, and never did sell. I don't think it's news to anyone that this situation has become more likely rather than less.

Now, if you've just been transferred and can't afford to keep this residence, or your loan has reset and you can't keep making the payments, or any number of other situations, you have a deadline for action. Not only that, but your backup or alternative plans are the pits. It is critical to understand that if you need to sell, all of your hopes for getting a good price hinge on the first few days on the market. If it's priced appropriately and you don't make it too difficult to view, it'll draw visitors. If if is properly and attractively maintained and presented, especially vis a vis the competition, it will get offers, and probably good ones. If any one of these four conditions fail in the current market, the property will sit unsold. Once it's got thirty days or more on the market, buyers become decidedly less interested in the property. Most of them won't even look at it on-line. The only way to get that interest back is to lower the price - and I mean significantly lower than it needed to be in the first place. The feeling on the part of most buyers is that "there has to be something wrong with it" Most people trust the collective wisdom of the market perhaps a little too much, because it ain't necessarily so, but you can't tell them that. They're not listening to you. They aren't listening to me, either, and there's nothing I can do that will change that, except for individual buyers whose trust I have earned, on individual properties. Instead of trying to change what you can't, change what you can. Most people don't want to, but that's the difference between success and failure - overcoming that reluctance. Yes, it means you agree to hope for less money, or you agree to spend money you were hoping you wouldn't, but those hopes were illusory from the first, like a short fat kid with no ball handling skills who hopes to play in the NBA. One thing I can absolutely, positively guarantee you is that prospective buyers don't care what you need to get to make a profit, or what you'd "like" to get for a property. If they did, I'd tell everyone I'd "like" to get two million dollars for that one bedroom condo in the 'Hood sandwiched between the methadone clinic and the Pawn Shop. They care about how the property and the asking price compare to the competing properties.

It is critical to understand a property niche before you put it on the market. What are the competing properties? What do they have that yours doesn't? What does yours have that they don't? Where do you fall on the pricing scale? One of the critical functions of a good listing agent is to critique your property soundly and fairly, and if you choose the agent who says only things that make you happy, expect to pay for that happiness with ten times the misery later, not to mention much less money and significantly greater expenses. The biggest red flag I know for a failed listing is an easy listing discussion. Mind you, you shouldn't end up mud-wrestling in the street and kicking and punching each other through walls, either, but if your agent isn't willing to argue with you and point out property deficiencies, and overcome your objections, how are they going to overcome the objections of the buyers and their agents?

On the buyers side, the best way to successfully mine desperation is to zig when everyone else is zagging. Unattractive presentation? I'm there. On the market for six months or serially listed? I want to see that property! Viewing restrictions difficult enough to make the most exclusive nightclub ashamed? I will figure a way to see it. Obviously overpriced? No obstacle. Why? Because each and every one of these properties is making themselves unattractive to everyone else. Some of them will lose the property to foreclosure before they do something smart, but others will deal with me and my desperation mining clients. But nobody else is going to make an offer, so barring foreclosure, eventually they'll deal with me and my clients or someone else doing the same thing.

You do need an eye for property if you're going to do this, something a good agent will help you with. There are more Money Pits than potential winners out there. Vampire properties that will suck your wallet dry without returning a profit. Neighborhoods where the surrounding properties won't support the price level you need to make a profit. I know I said that buyers don't care what sellers need - but at this point you're a buyer. If you know ahead of time that you're going to spend $40,000 by the time you're done fixing it, and the neighborhood won't support the acquisition price plus costs of selling plus $40,000 plus your profit margin, that is not the property you are looking for.

There's a very old saying, "Before you find your prince, you've gotta kiss a lot of frogs." Nowhere does this apply more strongly than desperation mining. You've got to deal with something more far more unpredictable than the Heisenberg Uncertainty Principle: whether this particular seller has had the epiphany that this is about the best offer they're going to get yet. A good buyer's agent can do quite a bit to cause that epiphany, but if the listing agent is stuck in the Land of Happy Thoughts, it becomes decidedly unlikely to work. I don't have much mercy on the subject of enlightening them; they willingly did whatever it was to their client and cost that client at least tens of thousands of dollars. What's a little professional discomfort as compared to that? The ones who learn from the experience become better agents (one actually called just to thank me a while back), the ones who don't, I'm not likely to encounter very often. To be fair, I was this sort of agent once. Briefly.

But the point is that the hit ratio on these offers is not anything like the ratio on the more standard buyers who are looking for the beautiful, fresh on the market property. Famous desperation mining advice: "Some will. Some won't. So what?" There's always a fresh desperation assay to perform on another property half a mile away. There are always property owners who put themselves into the position of having no better option than to accept your offer. Whether they actually will or not right now is uncertain. Eventually, most of them will accept someone's offer. I don't resent it when they accept someone else's offer later. My clients benefit just as often from someone else's set up offer, and everybody has their limits on the number of properties they can handle and the money they have available. The supply of such properties is always being refreshed by wishful thinking and bad agents who cater to it.

How can sellers avoid this? By understanding their property and where it falls in the market, and pricing it accordingly. This number has to be modified for showing restrictions, presentation, and many other factors, almost all of which have a negative influence. The listing discussion you have with prospective agents should not be easy - that's a sign of an agent who's just telling you whatever they think you want to hear. There should be some arguments, perhaps even heated discussion, as to what is appropriate and obtainable by comparison with the competition, but trying to get more is much worse than drawing to an inside straight. You can hope for that winning card in defiance of all rationality, but if you lose that bet - and just about everybody loses it - you're setting yourself up for a far worse situation than you really can get if you act correctly in the first place. Overpricing the property is not a "no lose" event - it's a situation where a very few win an extra $10,000 or so, while the overwhelming majority lose several times that amount. Planning ahead and knowing your time-line, and being up front about it with your prospective listing agent, will also save your backside. If you can only make three more payments, or if it's already in or close to default, you need to price accordingly. Nothing happens instantly in real estate. If you need it sold inside of ninety days, you need a solid fully negotiated contract in under sixty, and you're most likely to get the best offer within the first thirty days, if not the first week or so. Wasting your first couple of weeks or months overpriced because you "want to get more than that" is the best way I know of to end up with much less by putting yourself squarely in the crosshairs of desperation miners, because nobody else is interested in your property.

Caveat Emptor

Article UPDATED here

Over at my other site, I've published the second in my series on the Neighborhoods of La Mesa. In this case, it covers La Mesa Village, also known as Downtown La Mesa.

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Carnival of Personal Finance

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Ex-Google engineers introduce a new search engine called 'Cuil'

For starters, Cuil's search index spans 120 billion Web pages.

Patterson believes that's at least three times the size of Google's index, although there is no way to know for certain. Google stopped publicly quantifying its index's breadth nearly three years ago when the catalog spanned 8.2 billion Web pages.

It's not just how big the results are. Its how they rank them. Google certainly comes up with some counter-intuitive search results, because they consider the link somehow "authoritative". Ask is usually better, although it doesn't have the breadth.

Patterson enjoyed her time at Google, but became disenchanted with the company's approach to search. "Google has looked pretty much the same for 10 years now," she said, "and I can guarantee it will look the same a year from now."

That wouldn't be a problem if they didn't need to improve. But there's always room for improvement. If you won't keep improving, eventually your customers will go someplace that will.

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Virgin Galactic shows off mothership aircraft

White Knight Two has a 140-foot wingspan, about the same as a Boeing B-29 Superfortress, the World War II long-range heavy bomber. White Knight Two is designed to cradle SpaceShipTwo under its wing and release it at 50,000 feet in the air. Once separated, SpaceShipTwo will fire its hybrid rocket and climb some 62 miles above Earth.

One thing engineers know: It's easier to design for doing fewer things very well than a lot of things in a kinda sorta fashion. Separating the functions means that they get to save weight, use wings as far as wings will take them, and that the rocket doesn't need to waste it's power system on the thickest part of the atmosphere.

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Some real perspective on the Tennessee church shooting

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Your brain on Hope

An actual campaign commercial for Obama that looks a lot more like a parody to me.

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Where did SEIU get $150 million for politics?

Now the SEIU suddenly has $150 million, from which they've already committeed at least $85 million specific to Democratic candidates. That money got squeezed out of the locals under duress, in obvious violation of the spirit and letter of federal law. The union knows how to protect itself and its interests, and the lockstep nature of their support for Democrats should awaken voters to the threat their policies comprise. This is nothing more than a closed-feedback loop for Democrats, and Card Check is the prize that will ensure its rapid growth. The Department of Justice needs to put an end to this shakedown racket immediately.

Jimma Hoffa and Richard Daley would be so proud.

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One thing I am utterly disgusted about George Bush about:

White House sees record budget gap in 2009

We have a sudden need or desire to spend hundreds of billions of dollars fighting Islamic terrorism. Let's forget for a moment the fact that this need was just as present, and would have been far more effective, for at least ten years before 9/11. Let's just focus on post 9/11.

Anybody with a lick of sense would economize in every other area possible.

Not George W. Bush. Not any of the last four congresses either. Can't jeopardize the pork. Can't jeopardize the political payola. Wouldn't be prudent.

Ladies and gentlemen, the government checkbook comes out of our own pocketbooks. The game has always been to make certain the other guy pays the largest share possible, while you pay the lowest. This creates problems. Regularly, reliably, as certain as gravity.

I think we'd do better than we are now with a return to strictly per capita taxes, as was the case until the amendment permitting income tax in the early 20th century. When everything the federal government spends money on becomes a hit of so many dollars per person, and no dodging, people will get a lot more rational about what the government should and should not be spending money on.

And boy would the government shrink.

One more reason it'll never happen.


This is something that many folks don't understand about the loan market.

The labels "conforming", "jumbo" or, more accurately, "non-conforming" and (for the rest of 2008) "temporary conforming" only apply to so-called "A paper" loans, largely underwritten through Fannie Mae and Freddie Mac standards. The reasons for the labels are that they "conform" to Fannie and Freddie's requirements in all particulars, or that they conform in all respects except loan amount. But Loan to Value ratio, Debt to Income ratio, Time in Line of Work and everything else are according to the standards set down by Fannie and Freddie.

Government loans, VA and FHA, do not have conforming and Jumbo amounts. In the case of the VA loan, it's my understanding that they no longer have an explicit legal limit at all - just a limit on what lenders are willing to do given the limited nature of the guarantee. In the case of the FHA, there is a dollar limit, and it's usually even the same dollar limit at the upper bound as the temporary conforming limit. But to treat this as anything but a coincidence that saves brainwork on the part of the Department of Housing and Urban Development would be incorrect. In point of fact, the "regular" FHA limit is different from the conforming limit. For instance, here in San Diego the regular FHA limit is still $362,000 and change, as opposed to the regular conforming limit of $417,000, and there are differences between regular FHA and temporary FHA loans. Conforming limits are set by Fannie and Freddie in consultation with the US Government, the FHA limit is strictly government.

Subprime loans have none of this; only pricing and policy breakpoints, usually around $500,000, set by individual lenders.

So why is this such a big deal? You ask. Very simply, conforming loans get the best
tradeoff between rate and cost - what laymen think of as the best rates. It's an ambition worth having to have a conforming loan as opposed to anything else. The relationship between everything else varies over time, but you can expect sub-prime to have the highest rate/cost tradeoffs, while whether government beats non-conforming is time dependent. For about the past 18 months, government has been better, but back in 2003 at the peak of the refinance boom, non-conforming rates were generally lower than government - one more reason why government loans lost favor for several years. Conforming loans are also consistently available, and the government doesn't get involved. This was kind of a big deal several years ago when it could take four months for the government to process the paperwork needed for their loans. If I was told somebody wanted to buy my property with a government loan, there was quite a while there where I would have preferred another buyer.

Loans underwritten through Fannie and Freddie are also the most common sorts of loans out there, and they had the effect of standardizing the A paper market a couple decades back. When it was every lender for themselves, the standards varied by quite a bit. When they all want to sell to Fannie and Freddie, they all started using Fannie and Freddie's standards. Doing so meant they could loan the same money out several times per year, getting an origination bonus each time, rather than loan out the money and then only as it was repaid could they book the income. They could make far more money originating the loan and selling it to Fannie and Freddie than they could by actually holding it in their own portfolio. So-called "portfolio loans" still exist - large amounts of non-conforming loans end up being portfolio loans, which is one reason why they carry higher rates. When there's a ready, standardized secondary market for loan notes, and lenders can "turn" the money several times per year, they're willing to do the loans for less, which is a win for everybody.

Caveat Emptor

Article UPDATED here


Prof whose 'last lecture' became a sensation dies

Randy Pausch, the Carnegie Mellon University computer scientist whose "last lecture" about facing terminal cancer became an Internet sensation and a best-selling book, died Friday. He was 47.

His "Last lecture" video is here

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Shameful

Housing rescue on track to pass Senate by Saturday

The bill suffers badly from "throwing money at a problem to see if it will do any good." However politically popular it may be, it won't.

It won't fix the problems that led to this mess.

It does nothing that will actually prevent a repeat of same.

All it does is cost millions of taxpayers who lived within their means billions of dollars in order to bail out (partially) those who didn't, but mostly wealthy lenders who acted irresponsibly despite the fact they should have known better, while living a profligate lifestyle. Why? Because they make campaign contributions. This isn't about helping the little guy who stretched slightly too far. This is about billing the taxpayer for reckless corporate behavior.

The plan gives the Treasury Department power to spend unlimited amounts to prop up Fannie and Freddie, should they need it, to calm investor fears about their financial stability at a time of rising foreclosures and falling home values. Treasury Secretary Henry M. Paulson calls the authority a "backstop" which he has no intention of using.

That's funny. Why am I not laughing? I probably should. The alternative is worse. But somehow it's just not coming.

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Worst over for drivers as pump prices slide: AAA

"We expect pump prices below $4 this weekend and we could see the price fall another 25 cents before Labor Day (September 1), if oil prices don't rebound," said AAA spokesman Geoff Sundtrom. "We think it is primarily in reaction to the drop in demand by American consumers."

That and the fact that President Bush repealed the executive ban on drilling and congressional Republicans are making all kinds of political hay on repealing the legislative ban. Maybe it doesn't make much of a difference to actual supply and demand, but it put the brakes on the boost from speculation as suddenly people aren't so certain that supplies are going to continue to constrict, and the panic locking in of supplies has slowed.

I just paid $4.07, down from $4.54 a couple days before President Bush repealed his father's order banning drilling.

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Real Perspective on Europe and Obama: What they do when the rubber hits the road from National Review

If they want to vote in our elections, they should apply for statehood. When they have to live with all of the results (and pay the taxes), then they can vote.

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I've been Mr. Mom since Tuesday morning. The hard part is that the girls daycare is in Mira Mesa (convenient to my wife), while my office is in Santee. I've been putting in 2.5 to 3 extra hours per day in traffic, and I'm exhausted. Today was the last day, though, and she's supposed to be back tomorrow afternoon. Yay!

Still, I may not have the time to get anything new done by Monday. I haven't given up, though. I'm hoping I'll get some time Sunday.


Over at my more local area site, I'm starting a series on the neighborhoods in the areas I work. The first is Neighborhoods of La Mesa: Rolando. I'll be following it with others, probably before the end of the weekend.

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Althouse on John McCain vs Barack Obama on Iraq, and rips a partisan shill masquerading as neutral.

Senator McCain appears to be removing the kit gloves the press has been treating Senator Obama with.

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Just a little bit of bias

HT: Instapundit

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Willisms makes a point that can not be made too often about prosperity.

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World According to Nick makes a good point about defense against terrorism. It doesn't help the victims any, but it does enable the vast majority of the population to live normal lives.

The best way to make certain that proportion that gets to live normal lives is as large as possible is very simple: Cut down on the number of terrorists.

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Proof Positive that Mike Aguirre is too stupid to be allowed out without responsible adult supervision: San Diego sues Bank of America to halt foreclosures

San Diego's city attorney said on Wednesday he filed a lawsuit against Bank of America Corp and its Countrywide unit to prevent the mortgage lenders from foreclosing on homes in the city, which he aims to make a "foreclosure sanctuary."

OK, let's hypothesize that he gets what he wants. Lenders can't foreclose. What happens when the final resort of a lender to recover its money is taken away?

That's right, no new loans.

Price of housing crashes as nobody who can't pay 100% cash can buy property. Wealthy investors swoop in and buy properties that were formerly half a million dollars for maybe $30,000 each, tops. This lasts until the armed and violent uprising against city government, or the voters put in someone who may not be a great political panderer, but who does understand something of cause and effect. They then turn around and sell them for several hundred thousand with owner carrybacks (hey, I could get into earning 8% on $300,000 when I only have $20,000 in the property! It's a reasonable risk)

Meanwhile, when the problem is fixed and lenders start making loans, those properties then become worth current value plus economic appreciation in the meantime.

HT: Tigerhawk

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Obama's character seems amazingly consistent

That's not a compliment in this case.

I didn't remember the name, but it's long past time we created a Dorwin Award. And Barack Obama is the obvious first recipient if we do.

Dear Mr. Melson,

If you sign two or more non-exclusive buyer's agent agreements in your search for a home to buy, how do you avoid putting yourself at risk for a procuring cause situation from either agent, or even the seller?

Thank you,

A Fan

The first thing I've got to say here is that I am not a lawyer, so for specific legal advice for your state and your situation, consult one. That said, here's a broad brush picture of what I've been given to understand.

I am a big fan of the non-exclusive buyers agency contract. Consumers give someone a chance to get the job done, and they have only themselves to blame if they can't. Nor does it tie consumers to one particular agent. There's no way of telling if any particular agent is any good until they've shown you some property. They could be a bozo, they could be a commission grabber, they could have any number of potential problems with a buyer's agent. Consumers who limit themselves to non-exclusive contracts can have any number of agents they want working for them, as any counting number is possible. Finally, they can fire a bad agent simply by not working with them any more. The only thing you possibly give up is the ability to buy houses they introduced you to, and if you liked any of them, you would have made offers already. Nor is even that an absolute prohibition, as we will see a little later on.

The simplest way to deal with this is to tell whomever you're working with if you've seen a property before. You tell the agent you're with before they take you out there that they're not the procuring cause. I give every client a full list of what I'm planning to show them at the start of every hunting trip - and you should insist on this anyway, for this and many other reasons. I want my clients to have ready made paper for taking notes and writing down questions they may have and answers they get, even if that answer is, "I don't know yet but I will find out." If the clients don't want to see a particular property, if they've seen it before with someone else, etcetera, they have an opportunity to say so right away. If an agent takes you to something like that knowing they're not the procuring cause, they have no grounds for complaint when they don't get the commission. The easiest way for consumers is, "Joe with the office down the street already showed us 1234 Main Street, and we're considering it. We want you to show us something better if you can." That serves notice that there is no commission there for them, and it's going to be a rare exception that bothers with that property. If they start talking it down at that point, get out of the car, and tell them that their services are no longer desired. Here they were planning to show it to you as something they thought you should seriously consider, and now they're telling you it's a bad property because someone else will get the commission? They aren't out for your best interests, and they've just told you that in terms anyone should be able to understand. Fire them immediately, without any appeal. Nonetheless, dealing with the issue in this manner is more than sufficient to stop problems before they start as well as dead simple.

Note that I said it's sufficient, which is a logician's term that means it's at least enough. It's not the minimum necessary in this case. The entire thing about "procuring cause" is that this is the agent who made you want to buy the property. Therefore, sometimes I'm willing to disregard "I've seen it before" for clients I've got a good rapport with, if they tell me that they're not interested in that property for whatever reason that seems to them good and sufficient. "Please trust me with fifteen minutes of your time, because I think I've seen something that may change your mind." The essential point is that they've given me evidence that the other agent is not the procuring cause, because they did the exact opposite of interesting them in the property - they turned them off of it. If I can turn that around because I understand something about the property and their situation that causes them to see what I see, I am the procuring cause, and I have demonstrably provided value to those clients. It's rare, but it does happen. Two elements that are always necessary before I want to show a property: That I believe it will satisfy the client's needs and there's a good chance they'll like it enough to make an offer I can sell to the owners.

I should also mention that it's bad business for agents or brokerages to sue clients for commissions. Not only is it bad publicity and a good way to scare off future clients as well as probably more money to prosecute than you'll win if you're successful and half a dozen other disasters, but I've never heard of any agent or brokerage actually winning such a case. This is one reason why the incentives are there for agents to want to tie up your business with an exclusive agreement, but from a consumer point of view, exclusive buyer's agency agreements are a disaster in progress for no gain. You're tying your ability to buy a property for the next six months to one particular agent based upon their behavior in their office? I don't think so. I wouldn't do that on a bet, and neither should you. The games that can be played when one particular agent controls the transaction are too numerous to mention. The vast majority of my clients never talk to another agent, but that's by the client's choice, because I demonstrate I've got their best interests foremost in my mind every time we talk, meet, or correspond, and that they'll be lucky if the other agent is half as good as me. The knowledge that they do have a choice is one more motivation to do the best possible job I can, and a consumer can never have too many reasons why their agents want to do their best work possible. Which do you think is likely to do better work: The agent who knows that a commission is in the bag (eventually) as soon as he's got a signature on a piece of paper, or an agent who knows that the client always has a choice to try out the competition? I put it to you that the agent who's willing to be in the latter category will not only work harder, but that they're much more likely to be a capable agent, confident of their ability to make that client happier than anyone else.

This example may be fictional, but the character portrayed has one thing in common with a good agent, or anyone who really is good at what they do: He's not afraid to be measured against the competition.

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I may not be Lancelot (he's fictional. I don't have the author writing fiats in my favor), but I'm more than happy to measure myself against the competition in the only way that counts: the actual battle to make my clients happy. This is what the non-exclusive agreement allows the consumer to do - find their Lancelot, or at least Bors or Percival, instead of being stuck with Mordred. It's easy for Mordred to talk the same game as Lancelot, which is why you need to get them out in the field to observe them at work. Non-exclusive agency agreements let you do that. They doesn't bind consumers to the first agent they meet for six months that might as well be forever, because most people aren't going to wait that long if he isn't as up to the task as he might be. Furthermore, it's a lot easier to manage than trying to get out of that exclusive contract Mordred talked you into.

Caveat Emptor

Article UPDATED here


I got this question in an email, and almost blew it off, but then I realized for every person who actually asks, there are probably at least a dozen who are unclear but don't ask, and I apologize that I almost blew off the question.

This is one of those questions with a deceptively simple answer. Transactions fall out of escrow because something goes wrong with the terms of the purchase contract as negotiated. This happens in all kinds of areas, not just real estate.

In real estate, it is usually not the fault of the escrow officer. I have encountered exceptions to this rule (I had one close in May where the escrow officer tried their damnedest to sink it), but they are rare. The escrow officer is simply a hired middleman that handles the actual exchange by verifying everyone involved has in fact done everything spelled out in the contract, and assisting in certain ways those items which cannot be accomplished until close of escrow.

It is possible to fall out of escrow on a refinance, but nobody talks about it that way because the issues are a lot more limited, so usually people describe this in specific terms, such as "Couldn't qualify for the loan," or "The appraisal came in too low." These apply to purchase escrows as well, but the phrase "fall out of escrow" enables agents to avoid finger-pointing, and agents never know when the target you point at today is going to be someone whose good opinion you want tomorrow. Ergo, the commonality of the phrase. It may make it seem like escrow is the bad guy, but that is only rarely the case. There isn't some group of Nazgul masquerading as escrow officers going around and doing evil things to your real estate transaction. It's mostly a way of avoiding any unnecessary bad feelings from a broken transaction.

The most common way a transaction falls out of escrow is the buyer fails to qualify for the requisite loan. For the buyer, this can be avoided by making certain ahead of time that you're going to qualify, staying within budget, and - the step that many are neglecting right now - following the market while you're shopping. For sellers, it's more complex because you can't steer business, but it is doable.

The next most common way transactions fall out of escrow is that the inspection reveals something that wasn't anticipated in the purchase contract, and the seller and buyer can't agree on what's going to be done about it. This is one of the reasons why I'm so fixated on finding all the issues I can before we make an offer. Sure the inspector is probably going to find other stuff, but if it's all trivial, normal wear and tear, we don't have a threat to the transaction. Put those on the table during initial negotiations, and you've already got agreement before you've invested days to weeks and hundreds of dollars into a transaction. You would not believe how much this changes your outcome for the better without trying it.

Even if you don't catch everything ahead of time, be reasonable in negotiations after you find the problem. You can't force the other side to be reasonable, but if you control what you can control, chances are better that you'll come to a mutually satisfactory amendment. Remember, you wanted this deal in the first place. For the buyer or the seller, trying to sweeten it unreasonably because of a new fact is going to lose that transaction. Furthermore, the buyer has the inspection contingency to protect them, while they can decide to carry through on the sale on the previously negotiated contract even if the seller won't deal at all. Both buyer and seller jointly have the ability to decide whether the seller is going to fix it, give the buyer an allowance (usually a small amount larger than cost of fixing to make up for having to be the one to hassle with fixing it), or whatever else strikes them both as reasonable.

As you can see, neither one of these is the escrow officer's fault, and they shouldn't be blamed for something that's not their fault. It's not due to this (sarcasm) scary mysterious (end sarcasm) process called escrow - it's that there really was an issue endemic to the situation that the principals and the agents could not resolve in a satisfactory manner. There are any number of possible issues that the escrow process is intended to prevent: Title, unpermitted additions, you name it, it probably happens and agents deal with these issues regularly. The process of escrow is intended, in large part, to shake these problems out so that the buyer doesn't have nasty surprises later, and the seller really does get the money they're due for their property. Without escrow, the incidence of real estate problems would rise dramatically, as would the cost for dealing with them. If you understand escrow, you know that the reason for it, and why it's usually a consumer's best overall protection from bad transactions.

Caveat Emptor

Article UPDATED here


Carnival of Real Estate

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Last week, the New York Times accepted an editorial from Barack Obama. I linked it so you could read directly, and tore it apart.

Today, they refused an editorial from John McCain on the same point. They made noises like it's an editorial change they're looking for; the truth is that it doesn't fit their narrative, which at this point is to bury the good stuff that's happening over there with all the minutiae and troubles of the returning troops. At roughly 150,000 troops per year, mostly young and all with normal human foibles, it would be a miracle if they couldn't find enough examples of trouble to distract the public.

The New York Times is entitled to control the contents of their editorial page, even more so than others, as an argument might be made that this is their official position. Nor do I want to bring back the "Fairness Doctrine" in any way shape or form. The only gripe I have with this situation is the the New York Times does everything they can to aid Barack Obama while pretending to be neutral, which they are not. I'm fine with them supporting Barack Obama. People have the right to support the presidential candidate of their choice. That's just a small (if critical) part of the First Amendment, and it protects you, me, and everyone else as well. What ticks me off is them pretending they are balanced, fair, neutral arbiters, when in point of fact they are the furthest thing from it.

You can read the editorial at The Drudge Report, but Senator McCain's critical points:

But I have also said that any draw-downs must be based on a realistic assessment of conditions on the ground, not on an artificial timetable crafted for domestic political reasons. This is the crux of my disagreement with Senator Obama.

and

I am also dismayed that he never talks about winning the war�only of ending it. But if we don�t win the war, our enemies will. A triumph for the terrorists would be a disaster for us. That is something I will not allow to happen as president.

I can give at least 4125 American reasons (and roughly 150,000 Iraqi ones) why Senator McCain is right and Senator Obama is wrong.

Hot Air has the text of the rejection from the Times. Obama's editorial didn't have several of the alleged requirements.

More people are catching on to this sort of double standard. Rasmussen: Belief Growing That Reporters are Trying to Help Obama Win

Ya think?

The latest Rasmussen Reports telephone survey, taken just before the new controversy involving the Times erupted, found that 49% of voters believe most reporters will try to help the Democrat with their coverage, up from 44% a month ago.

Just 14% believe most reporters will try to help McCain win, little changed from 13% a month ago. Just one voter in four (24%) believes that most reporters will try to offer unbiased coverage.

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This should have been done a long time ago: Bush law chief seeks new Qaeda war declaration

Congress should explicitly declare war against al Qaeda to make clear the United States can detain suspected members as long as the conflict lasts, U.S. Attorney General Michael Mukasey said on Monday.

The Democrats are saying they don't want to cooperate while Bush is still in office. Gee, you might think it was political or something.

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Buyer Beware: The Many Ways Retailers Can Trick You

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It's not news, it's Scrappleface: Sen. McCain Announces Late White House Bid

But like all good satire, there's quite an element of truth in it.

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Inartful Dodd-ger

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Faster, Washington! Drill, drill!

One option, we were told, was to make gas artificially expensive, forcing our ignorant, energy-gobbling neighbors to alter their destructive habits.

Well, here we are. At $4 a gallon for gas, we already have a flailing economy. Isn't it glorious? And isn't it exactly what many environmentalists desired?

and

Don't worry, though, congressional Democrats have a bold plan. Hold on for 10 or 15 years and they'll have a bounty of energy options. They promise. But no oil shale. No clean coal. No nuclear power. And definitely no more oil.
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A consequence of illegal alien "sanctuaries"

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How reliable is DNA evidence?

Encouraged, Barlow subpoenaed a new search of the Arizona database. Among about 65,000 felons, there were 122 pairs that matched at nine of 13 loci. Twenty pairs matched at 10 loci. One matched at 11 and one at 12, though both later proved to belong to relatives.

Barlow was stunned. At the time, such matches were almost unheard of.

That same year, Fred Bieber, a Harvard professor and expert in forensic DNA, testified in an unrelated criminal case that just once had he seen a pair of profiles matching at nine of 13 markers, and they belonged to brothers. He had heard of a 10-locus match between two men, but it was the result of incest -- a man whose father was also his older brother.

Dear Mr. Melson:

My husband and I are great fans of your Searchlight Crusade essays. Excellent work!

In today's mortgage-mess market, will lenders reject loan applications from average buyers (not investors) wanting to purchase acreage with a teardown outside the city limits, with the intent of building a new home? Obviously, preservationists and neighborhood associations who might object to interference with the "character" of the area wouldn't be a major factor in this kind of decision.

Would the mortgage needed for such a purchase have to be a combo "jumbo" loan, or what? We are in DELETED and would be using a VA loan.

Okay, let's deal with the peripheral stuff quickly. The "jumbo" and "conforming" labels don't apply to VA loans. They're for conventional A paper financing only, and VA loans having a government guarantee attached as well as the ability to go up to 103% of purchase price with no PMI, there's no need to split the loan amount or to pay PMI at all with a VA loan. I know of at least one lender who'll do VA loans up to $1.5 million.

Now as to the main question: Buying teardown property.

All residential real estate loans require two things: 1) an interest in land, and 2) a permanently attached residence where people can live. Condos and PUDs qualify, because they do have an interest in land held in common, as well as the residence itself. But bare land does not qualify for standard residential financing, because it has no residence.

So the essential question here is: Is the building actually condemned? If it is, what you have isn't a residence at all, but bare land that it's going to cost you money to scrape clean. If you hear an agent talking about "land less demolition and haul away", this is the type of situation you're in. You can't get a residential loan on it because you can't live there. You have to go to one of the other loan types, which means higher down payment and usually higher rates, as well. You've still got the utility hook ups, and you might be able to use the original foundation, so you're not starting from nothing, but property with a condemned building on it is generally less valuable than bare land, because you've got the expense of getting rid of the condemned building. Condemned buildings also have the virtue of short-circuiting most concerns of historical preservation - not always, but most of the time. If the City of Philadelphia were to condemn Liberty Hall as unsafe, I'm pretty certain that wouldn't be the end of the matter. On the other end of the scale, there's a house on the same block I grew up designated historical because it was built in 1895 and by the time anyone in the City of La Mesa looked around, it was one of the oldest buildings remaining in the City. But it wasn't really anything special at the time, so if it was ever certified unsafe, I imagine there wouldn't be much fuss about actually tearing it down.

If the building is not actually condemned, however, you do have the ability to get a residential loan on the property, but you also have to be careful it's not designated historical in any way, shape or form - and that there's no one with any interest in designating it so. Once designated historical, it's like the labors of Sisyphus to try and get permission to get rid of it, and even the attempt to designate it as historical (whatever that attempt may be motivated by) can cost years and many thousands of dollars in expenses. Just because it's outside city limits doesn't mean that nobody has an axe to grind.

People do want to tear down existing buildings for other reasons than condemnation. They want to do something else with the land, or they just don't like what's there. In the meantime, they can still buy with a regular residential loan, until they're actually ready to tear it down. In such a situation, your lender would probably have the right to call the loan, so your destruction and construction financing should take cognizance of this fact. Even if your state law and loan contract do not give the lender the right to call the loan, one should be very careful that you're not misrepresenting your intentions in any way. In other words, if you're buying with intent to demolish, don't hide it from the lender. That's FRAUD. If you refinance out of the loan before destruction begins, it shouldn't be a problem. But if you sign loan documents today, and tomorrow the bulldozers start flattening, a reasonable person is going to see it as deception.

There are also the permits to consider. No matter where it is or what you want to do, it's going to require building permits. This is often a paper trail for preservationists of whatever stripe, as well as for the lender who wants to show fraud. You told the lender by signing the loan documents that everything was hunky-dory on the 15th, but you had applied for demolition and construction permits on the 14th. That's what is called a "smoking gun." Permits for single residence construction are both costly and byzantine, and often so contorted that the only practical way to get them is to commit an illegality. Poor civil servants, how else are they going to live in ten bedroom mansions and take a dozen foreign trips yearly?

There are a couple of commonly used alternatives. The first is to leave one or more walls standing. When you do that, it's not new construction, it's reconstruction - the same as after a fire or earthquake - and the permit process is far more streamlined, but you're still going to watch it as far as the original financing goes. Check with experts in your particular area as to the ins and outs. The other is to retain the old residence while you build a new one, then demolish the original structure after you've moved into the new. The advantage there is you can definitely keep the original financing in place during construction and only worry about the money you need for actual construction, but the disadvantage is that you've got to deal with zoning issues, as well as being unable to use the original site for the replacement residence - so you have to pour a new foundation and clone the utility hookups, and quite often, the lot is just too small to have a second site available that meets setback requirements, etcetera.

Destruction of an existing building and construction of a new one are both difficult tasks, fraught with landmines, if you want to do it legally. One of the things many folks just never quite understand is that those costly hurdles and roadblocks they want to throw in the way of "commercial developers" apply just as strongly to the individual property owner as they do to that corporation. In fact, what the corporation may accept as a cost of doing business, thereby passing that cost along to its customers, as well as economies of scale and everything else, that corporation is much more likely to be able to afford to navigate the process than any but the wealthiest of individual homeowners. Furthermore, by artificially limiting the supply of housing, this has the effect of raising the point at which supply and demand are in equilibrium (i.e. market price) quite significantly. I've seen recent estimates for San Diego County that this cost of getting permits raises the cost of single family detached housing by anywhere from $130,000 to $200,000 over what it would otherwise be. Incidentally, for the developer who goes through the process for several hundred units, the economies of scale reduce the price of the permits to roughly $20,000 per unit. They make a profit off the situation, while the poor guy who wants to build their own property may end up spending hundreds of thousands of dollars just to get the little pieces of paper that say it's okay for them to actually start construction. So be careful, and plan ahead, and make certain that it's going to be possible within your means in the area you want to buy before you sign on any dotted lines.

Caveat Emptor

Article UPDATED here

Mellon

| | Comments (2)

March 25, 1993 - July 19, 2008

Just got home from running a couple of errands, and when we got back, Mellon was dead.

She was fifteen years old, and not in good health, so I'm not all that surprised, but it is like losing a family member. This has not been a good year for me, in any way, shape or form.

She was a pureblood dachshund, black and tan with a silver grey dapple on her. Her name was out of Tolkien elvish, "Friend" it meant, and she was. No champion dog she, but one of the most eye-catching dogs you ever saw, and she loved attention. I knew when I bought her that her hips were bad, but she was such a sweet little dog her whole life that everyone loved her, even though she started losing her mobility before she was five. All she wanted out of life were regular meals and a little affection. I did my best to provide those, and in return, she loved everybody. She never so much as growled at either of the kids, or anyone else for that matter (except Julia, who I felt guilty about introducing into the family with her so old and hampered).

She may have started losing her mobility early, but until recently you could always tell when she was happy. She would run little circles of joy when something good happened - special treat, mommy and daddy paying attention to her, or even just mealtime. She'd go round and round, hips pumping despite how damaged they were. She wasn't in pain, she just couldn't move as easily as most dogs any longer. When she lost the ability to run in circles, we bought her a little canine wheelchair that she hated because she couldn't get under the couch to take shelter from Julia. She couldn't run and play like the puppy, so the girls started ignoring her, but she was still happy with whatever anyone would give her in the way of affection.

Like every other dapple dachshund I've ever seen, she started losing patches of fur quite early. She was such a pretty dog when she was young, but even my wife (whom I met when Mellon was about three) had never seen her with all of her fur, and all of my pictures of her when she was younger (the way I want to remember her) are in storage. Luckily, she lived in San Diego, and she had a sliding glass door her whole life that got good sun in the afternoon. You always knew where you'd find Mellon in the afternoon - right there in that sunny spot.

Goodbye sweetie. Whereever dogs go, may you always have a warm sunny spot and as much food and affection as you need, without any young puppies who don't understand that you're old and can't play like that. You helped me in a very bad time of my life, and I will miss you badly.


I just went into the email for the Consumer Focused Carnival of Real Estate. Everything submitted with had errors too big to ignore or was basically vapid spam, chumming for a link. Therefore, consumer focused Carnival of Real Estate will be delayed by two weeks, and henceforth is reduced to monthly.

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Obama's latest ad: More of the same. Vague platitudes, overstatement of accomplishment, no taking of positions.

More airbrushing of history.

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Classical Values makes several good points about the oil supply.

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People Unclear on the Concept Department: Joseph Heller sued the District of Columbia over its handgun ban. He went all the way to the Supreme Court and won. His application for a handgun permit was denied.

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President Bush can't catch a break.

President Bush kills the Executive Order prohibiting drilling. Oil prices recede 10% within three days. Part of it was a smallish supply windfall, but the largest part was some optimism on behalf of futures markets that the regulatory equation may be changing.

There's still the Congressional ban, of course, and Ms. Pelosi has said there will be no drilling so long as she is speaker, which is one more reason why rational Americans should vote for Republican candidates. Unlike most such issues, however, it's so easily understood that a good number of our less rational Americans may follow us. If she doesn't moderate her opposition, she could find her Democratic congressional cohorts pulling a "Gingrich" on her, and for far better reasons.

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Israel makes arrests in alleged plot against Bush

Israel's Shin Bet counter-intelligence agency said one of the suspects had used his mobile phone to film helicopters at a sports stadium in Jerusalem that was used as a landing site for Bush's delegation.

The suspect then posted queries on Web sites frequented by al Qaeda operatives, asking for guidance on how to shoot down the helicopters, the agency said in a statement.

Of course, to many on the political left, it's just performance art!

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Finally got the dang tooth taken out on Wednesday, and feeling much better, even though my sleep cycle is completely messed up. Should be back to normal by the end of the weekend. I'm thinking I'll likely have mostly normal article schedule next week.


Or,

If a Recession will not come to the US, the Democrats will send the US to the Recession.

Why did IndyMac Bank fail? Charles Schumer wrote a letter saying it was going to, and then published that letter, resulting in a 1.3 Billion dollar run on deposits over a two week period.

I don't know any lender that could remain solvent in the face of that.

From the Office of Thrift Supervision

The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac's viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.

"This institution failed today due to a liquidity crisis," OTS Director John Reich said. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."

Some are asking: Did Senator Chuck Schumer Cause Indymac Bank Failure?

The answer is, not by himself. He didn't force them out on a limb by making risky mortgages. But he certainly chopped off the branch they were sitting on. Many institutions in worse shape have survived to become profitable again.

Now if I knew one of my neighbors was struggling to survive, and hanging on but with decent to good prospects of making it back to health, I wouldn't go administering the coup-de-grace while there was that chance. But I'm not a Democratic politician trying to convince people that the economy is in trouble.

The Democrats want a recession so badly that they're willing to create one. Anticipated direct costs to the taxpayer of IndyMac's failure? Four to eight billion dollars. So that people will be mad at the President and vote in Democratic candidates..

More evidence:

Bloomberg: IndyMac Seized by U.S. Regulators; Schumer Blamed for Failure

seeking alpha:

Schumer's letter served no purpose because the FDIC and OTS were already closely monitoring IMB. The letter was only for public consumption, to create publicity for Schumer. The New York Times "Regulators Seize Mortgage Lender" reports Reich saying IMB's deposits were actually increasing before the letter was published, after which withdraws averaging $100M a day started ($1.3B total).


Jerry Bowyer: How Chuck Schumer Caused the Second Largest Bank Failure in US History

Indymac has been under attack from the hard left. The Center for Responsible Lending issued an attack on Indymac within a few days of Schumer's letter. CRL is part of a small army of left of center 'research' groups, community organizers, and public interest law firms who make their living accusing home lenders of racial redlining and predatory lending. On June 20th the Center accused Indymac of unfair practices regarding minority borrowers.


Professor Bainbridge has about the sanest response to Fannie and Freddie troubles I've seen.

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A minor miracle has happened: The prosecutor of the International Criminal Court has filed genocide charges against Sudan's President. Not that it hasn't been obvious the government in Khartoum was behind the Janjaweed for at least five year - but that the ICC - dominated by accomodationist european nations - actually found the courage to file the charges. We'll see how far they go.

al-Bashir is unlikely to be sent to The Hague any time soon. Sudan rejects the court's jurisdiction, and senior Sudanese officials said the prosecutor was politically motivated to file the charges.

A dissenting view from Drina, a pseudonymous Sudani

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Obama gives us his plan for Iraq, and ends up somehow showing himself even more naive than I thought he was. Al-Maliki's request for a timetable for withdrawal is not a request for complete withdrawal - he simply wants a timetable for full normalization and American troops to pull back to more or less permanent bases and American troop operations stop being a part of life in Iraq, as BBC reported. Al Maliki knows they're going to need us for a long time to come. If he really did request us to leave, and we honored that request, they'd immediately tell us they didn't mean it. But Obama can't be bothered to find out what Al-Maliki actually said, he writes as if Al Maliki said what Obama wants him to say. You'd think someone who's allegedly as smart as Obama's supposed to be could figure out that the head of foreign governments aren't likely to be his sock puppets.

Read Christopher Hitchens for more rebuttal, and Michael Yon for still more. Pay particular attention to the powerpoint presentation.

Yon says we do need to do something to turn Afghanistan around, though.

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An eyewitness account of Zimbabwe's election

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Hot Air's on a roll today, with this humorous piece on the new iphone from Will it Blend?

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UPDATE: Still haven't had the tooth out. At this point, still hoping to schedule it for tomorrow (Tuesday). The interaction of painkiller and antibiotic is doing strange things. I was going along fine, then it's like I hit a wall. Expect things to continue to be strange until I'm past this.

And I mean that literally. Do it yourself with no begging for free property advice, free help, free negotiations help, free real estate location services, free answers to "how do I deal with this problem?" and not least of these, nobody to blame but yourself and nobody to sue when something goes wrong because you didn't understand something important.

One of the things I do to generate business is talk about bargain properties I've found that current clients aren't interested in, for whatever reason. Maybe it's a bit too much of a fixer. Maybe the location just doesn't work for them. Maybe it just looked so interesting I checked it out despite not having a current client it may be right for. It's not like a listing agent or owner with any kind of clue is going to object to having somebody else think their property is worth a closer look!

This is one e-mail exchange I went through recently. It's not at all uncommon.

Please tell me the address of this property in La Mesa so I could drive by and I will use you as a buyers agent.

This was my reply

Good to hear from you and I look forward to meeting with you!

Here's what we do: We get together, and we both sign a standard CAR non-exclusive agency agreement, which says precisely what you just typed. If you don't buy the property, no obligation is incurred. Neither of us has anything to lose by signing such an agreement. In fact, the only way I gain is by finding properties for you that really are better values than anything else - enough so that you want to buy them.

You don't like the property, you have no obligation whatsoever. This way, neither one of us is risking anything, and if you don't like my work, you can terminate the relationship at any time.

The reply is illuminating. This is the entirety:

I sign nothing but my paycheck

Note that he still has not so much as told me his full name. No phone number either. And when I note that being able to find and recognize this sort of property might be a valuable skill, and doesn't he think that someone who 1) recognizes a valuable commodity that no one else has, 2) points it out to you and 3) enables you to get an all around better bargain deserves some compensation, this was the reply:

Just what I need another low life realtor. You guys are a dime a dozen. YOu mean years of ripping people off for every nickle that you can squeeze out of them. Get a real job I have one. Don't bother responding your trash.

Aside from his desperate need to repeat eighth grade or invest in a better word processor, the charitable interpretation of this reveals an all too common mindset: that of unconscious incompetence. Less charitable but happens constantly: This person is trying to make use of my ability to find and recognize bargains without paying the price for that expertise: Using me as a buyer's agent. And make no mistake - in either case, this person is trying to prove that agents are worthless by getting me to provide one of the major reasons you need an agent, free of charge. Suppose I asked you to work for a week without pay, or your employer volunteered you for a week of unpaid work? That's the equivalent situation. And to accuse real estate agents of being lowlifes because they won't do this is different because...?

If you don't think finding and recognizing such a property is a skill - and a valuable skill at that - do it yourself. The fact is that if you could, you wouldn't be asking me to do it for you. The times when I search places other than the publicly available MLS to find real bargains are vanishingly rare. I can find bargains there because 1) I know what to look for, 2) I know what to avoid, 3) I am very good at spotting problems, and 4) When I don't spot any big problems, I've got a reasonable basis to believe that this really is a bargain. If this describes you, you might not need me. Mind you, any number of people who don't need a full service agent still prefer to use one due to time and liability concerns, but if you know everything a conscientious agent does about property and negotiating and the law and the market you are looking in, why haven't you got a license of your own? That you haven't taken the test is a "fooling yourself" answer - California's test doesn't cover ten percent of what a good agent or loan officer needs to know, and is one of the harder ones. The fact is that it is much easier to get licensed than to actually know what you're doing, so if you're not licensed, how could you possibly know what you're doing? In logic, this is called necessary but not valid. In other words, you don't know what you're doing. if you were on a game show, you'd be being told, "Thank you for playing," as they ushered you off camera in favor of the new contestant. (Many of my articles are aimed at helping you defeat the necessary but not sufficient condition of a licensee who doesn't know what they are doing, or won't do it despite knowing).

How offering a skill for sale makes me - or anyone else - a lowlife is beyond me. If you don't need the skill, don't buy it. But if you need the skill, you are expected to pay the price. This is called commerce, and the fact that you may think it is a worthless skill does not make it so, especially as you try to trick the person into performing it for free based upon a false promise. This person, and many others, has tried to get me and other agents to perform it for free under false pretenses. Does this sound like a worthless skill when it is so apparently valuable that people try to scam you out of it? Actually, I'm not certain there is such a thing as a worthless skill, but there are skills that aren't worth anything to me. I don't need anyone to make candles by hand, and am definitely not willing to pay anything for it. This doesn't mean there aren't quite sane people willing to pay a high premium for hand-made candles, but you don't find me among them, trying to get hand-made candles for free. If you really don't think what agents do is valuable, don't try and scam them into doing it for free. Do it yourself.

I do have some small element of understanding for some of these people. The NAR and various state realtor organizations have positioned the profession as a bottleneck or a tollbooth upon a highway. Trying to make people pay the toll because it appears they don't have any choice. Guess what? People have a choice. There is no legal requirement whatsoever to use an agent at all in any state I'm aware of. I can't make you pay me and I certainly won't even try to force you, but neither will I work for free. I have to feed my family somehow, and if I can't make money being an agent, I'll go do something else - but I certainly won't work as an agent for free in my spare time! I will give you reasons why I'm worth a lot more than I make in terms of the client's bottom line, and I will certainly put myself forward as being a particularly good example of an agent and loan officer. Not only is it objectively true in my case, that's how businesses succeed. But if you don't want to pay for my expertise, that's fine. I'll keep looking for those who are willing. But don't accuse me or anyone else of being a lowlife because we won't work for free.

Here are some cold hard facts: if this guy was finding this sort of bargain on his own, he wouldn't be emailing me. He'd be in escrow, if not already moved in to the property of his dreams. If what I was offering wasn't more attractive to him than what he has found on his own, he would never consider emailing me. If he was able to recognize bargains like I can, he wouldn't be looking where I advertised. In short, everything about his response and the fact that he did respond shouts out that he does consider what I do valuable. So which is correct: The cheap ego shot when I won't give him what he wants for free, or his desire for the results of that skill? Is the skill worthless and am I a lowlife, or is the skill valuable, do his actions tell the world that he considers it to be valuable, and is his response when he can't get it for free entirely too much like Aesop's "Fox and the Grapes"?

If you really don't believe you need an agent and that you can do it on your own, you shouldn't be looking for an agent willing to work for free like this. And like any other situation where someone is pretending an answer is different from the real answer, pretending doesn't make the answer any different, political spinmeisters notwithstanding. All pretending otherwise does is give the pretense needless opportunity to damage you and everyone around you. In the case of a real estate transaction for half a million dollars or more, that's quite a bit of damage indeed.

There are those who would have you believe agents don't do anything, or don't do anything valuable enough to warrant what we make. Some of them are themselves sharks that agents protect you from. Some of them have competing products of their own to sell. Some of them just look at the raw number of dollars and don't understand what anyone could do to earn that sort of money or don't understand how much a good agent who wants to stay in business needs to do. You're welcome to believe any of them. But if you do believe them, go do it yourself. Don't try to get agents to work for free - all that says is that you do recognize the value, but are unwilling to pay for value received. And don't get upset when anyone with more than an hour or so in the business recognizes the game you're playing for what it is - a scam intended to defraud them. Finally, if you're tired of playing this game because all it does is cause frustration, stop playing it and start working honestly with one or more agents. The good ones who know what they're doing are more than willing to bet their skills and their time that they will get the job accomplished, with no upfront cost to you.

There are lots of things that any intelligent agent will happily do for free, on speculation of eventually landing a client. I certainly do. But there comes a point where there is real skill and real time and real liability on the line, and if you're not willing to sign up with them at that point, any agent with more than about an hour in the business is going to realize what you're up to.

Caveat Emptor

Article UPDATED here

I still don't have the tooth pulled, but as of late last night, it seemed like the antibiotic had finally caught up to the infection, and the pain went down a lot over a couple of hours. It still hurts, even with pain killers, but it's not like being actively and continuously stabbed any longer. I'm going to try moving down to the Vicodin the general dentist gave me today instead of Percocet, and maybe I won't be quite so out of it, so maybe I can write something.

This whole experience has been a real eye-opener in another way - exactly how bad alleged customer service really can get. It's a confirmation of my policy: Nobody working for me is allowed to talk to my clients. They are allowed to take a message, and they are allowed to answer simple questions where there is reason to believe the client will probably be happy with the answer. They are not allowed to call my clients without direct specific instructions that I just don't give them. Other than that, there are many reasons why every client gets my cellular number, and is encouraged to call me directly, and this article is going to talk about one of the many disasters this prevents.

My tooth had started hurting on Monday, and so I'd gotten a dental appointment on Thursday, but late Tuesday afternoon, the pain basically exploded. Unfortunately, by the time I could call the dentist, the office was closed for the day, but the dentist gave me a pain-killer and anti-biotic first thing Wednesday. Being a general dentist, Vicodin was the strongest thing he could give me, and it just didn't do more than take the very worst of the edge off for a couple of hours, and I had to wait six hours between doses. But to remove this particular tooth, he had to send me to an oral surgeon. Meanwhile, the infection kept getting worse.

By the time I got to the oral surgeon's office on Thursday, I was literally crying with pain despite the Vicodin. They gave me prescription for Percocet, but said they needed medical clearance from my cardiologist and my regular primary care doctor to pull the tooth. They were also worried about the blood thinners I'm usually on. My cardiologist sent back an answer to them promptly that said it was absolutely fine to pull the tooth, and I could stay on the medications as well, or the dentist could take me off for as long as he felt necessary. Basically, according to her, there was no need for any special precautions, but she was happy to go along with anything the oral surgeon wanted.

This wasn't good enough for the dentist's office staff. No, no, no - they had to have the cardiologist say exactly how many days I had to be off the blood thinners before and after surgery. She responded once again by saying that the answer was "zero days" as far as she was concerned. She gave clearance for the dentist to take me off the blood thinners if he thought it advisable, but she did not see such a need for me to stop those medications from a cardiologist's point of view.

Despite being the answer any reasonable person could have hoped to get, this was not a response the dentist's office staff was prepared to accept. I do not know if this was a programmed answer or if the dentist himself directed it, but I have no evidence whatsoever that the dentist was involved in any of these discussions. No, according to these bozos (remember, these are office staff - not nurses, not dentists, not even dental assistants as far as I'm aware), my cardiologist had to give a number of days before and after that I was going to be off those blood thinners before the tooth could be pulled. Keep in mind that the cardiologist - a very sharp young lady with an advanced medical degree and several years experience applying it - had twice said that this was not required. And she was being refuted by office staff. This went back and forth for two days, and I'm still in increasing pain the entire time, including the possibility of increasing complications as the situation is allowed to build.

Matters did not improve when my primary care physician finally responded, saying that she wanted me to be off the blood-thinners before surgery. Then the dental office staff went really berserk, trying to say that since there was a contradiction, both physicians had to consult with each other and issue a joint letter. I tried very hard to explain to them that they were dictating terms of practice to not one, but two highly qualified medical practitioners, and that the terms of both instructions could be satisfied by simply doing what the more stringent of the two had asked for - and since I'd stopped them on my own when this whole issue first started, that was already accomplished by this point, so how about scheduling me for that tooth extraction?

No, no, no. That wasn't acceptable at all to these little tin-pot dictators. And at this point, my willingness to put up with any more of their nonsense basically evaporated. Keep in mind that I had been at home, in pain, unable to eat anything solid, for two full days since they had made their demand, and it's 4:00 Friday afternoon, so we're looking at three more days of pain and lost work before I can even schedule an appointment, never mind actually getting to that appointment or the aftermath. Meanwhile, whatever is going on in my jaw continues to get worse. Buddha only knows what complications this delay is going to cause. I asked for the supervisor, then for the dentist. The supervisor was part of the problem, and they wouldn't let me speak to the dentist, nor have him call me back.

Ladies and gentlemen, part of the reason and necessity for any licensing program at all - and this principle applies just as strongly to agents and brokers as it does to dentists and doctors - is that you have shown qualifications and a sufficient understanding of the thing you are professionally licensed in to make decisions and accept the normal decision-making responsibility of that practice. If you are not willing to accept that responsibility, or have willfully insulated yourself from it, then you are not worthy of your license and definitely not worthy of my business. I did manage to go back and get another referral from my general dentist, but the first oral surgeon's office staff refused point blank to return my medical records - in violation of state law - claiming that "office procedure" was not to release those records. Let's see: "office procedure". I don't intend to try it, but do you think a realtor might get away with claiming "office procedure" to defuse an accusation of breaking state law or RESPA? Let's say you get pulled over for speeding. How well do you think telling the officer that "office procedure says I'm not allowed to do less than 80 mph" would work in getting you out of a ticket, or do you think the officer might be justified in doing something more than merely writing you a ticket in such a case?

Not only that, but by failing to turn over my doctor and my cardiologist's existing letters, they prevented the second oral surgeon from extracting the tooth yesterday, therefore, the pain continues, as well as everything else involved. By refusing to turn over the X-ray that my general dentist took, they were keeping records they had no rights whatsoever to keep, as they had taken it in the first place under pretense of being willing to extract the tooth, they explicitly added to the cost of the replacement for the job they agreed to do by accepting it - but didn't. Both the state dental licensing authority and the insurance company are going to get complaint letters detailing these facts. I can hope to put them out of business, or at least to cost them all of the clients they might have gotten from my insurer, and my general dentist certainly isn't going to send anyone else their way.

What is the lesson here, the applicability for my own business? Well, it's one I already knew, but it's been quite a while since I encountered jokers who were so determined to exercise their own petty power to the utmost. This is why I want to handle all client communications, and why an agent that doesn't is setting themselves and their customers up for a bad experience. Yes, it means I can't accept quite so many clients as I could if I were fobbing off as much as possible on an office staff - but I'd rather make a little bit less money and have clients that are 100% satisfied, making it much more likely that they will come back to me or send others to me. Because anyone who isn't 100% satisfied is poison to my business, and they're not likely to come back or send me anyone else, which makes letting office staff insulate me from my clients is far more costly that the somewhat lowered earnings ceiling of handling all customer communications myself.

When choosing an agent or loan officer, you want one who tells you to call them, not the office staff, and who handles your calls personally, not by telling someone else to call you back. It's perfectly fine to have staff handle communications between agents or offices or service providers. But someone who's too busy to handle your concerns and issues themselves also can't keep track of what those issues and concerns are - and it's likely to bite them and you. Considering the dollar amounts involved in real estate, I don't want to be bitten and I will do anything I can to keep my clients from being bitten. Be careful that any agent or loan officer you choose acts the same way I do.

Caveat Emptor

Article UPDATED here

Iran test-fires missiles in war games in Persian Gulf, says it can retaliate if attacked

"Our hands are always on the trigger and our missiles are ready for launch," the official IRNA news agency quoted Salami as saying Wednesday.

Do they have nuclear weapons yet to put on those missiles? Only Iran knows for sure, but the smart way to play it is "yes." Being unwilling to confront problems early has quite a steep price. A 1 ton conventional warhead is bad enough, but that's plenty of payload for a nuclear warhead.

Next day: Iran test-fires more missiles in Persian Gulf

via LGF, it appears that Iran photoshopped their missile launch

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News rippled from tomorrow's headlines: Obama: Iran Needs to Know We Mean Talk

I wouldn't say that "no Bush" is a difference that makes no difference, though, because there is a difference. Exactly the opposite of the difference going from Carter to Reagan made.

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Why SEIU wants "card check"

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Do Congressional Democrats fear free speech?

I'd say it has more the look of trying to censor the opposition. Majority (Democratic) messages get approval easily, minority (Republican) ones are censored by the majority. In other words, an incumbent party protection rule.

via Instapundit, more at ChicagoBoyz

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One more reason China needs a new government

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I am very sorry for the sparse output this week, especially after last week's vacation. I'm sitting here on Percocet and my jaw still feels like someone is stabbing it with an icepick. While this is an improvement, it's still very difficult to think, work, or drive. I do not think I'll be able to do anything more than reprints until we get clearance to extract that tooth. That moment cannot come too soon for me. I've already lost three full days of work over this, and the pain isn't any fun, either.

Hello, Mr. Melson,

I am one of your legion of fans of your www.searchlightcrusade.net website, having lucked into stumbling upon it by hyperlinking from another site. It is my goal to read EVERY ONE of your archived articles before I buy a house.

Yes, I wish you were here in DELETED, where I'd pay your going rate in a heartbeat to be my non-exclusive buyer's agent; but I must content myself with your archives to learn how to navigate this shark-infested swamp of BUYING A HOUSE. (Unless your services can guide me to such an agent here in DELETED.)

In hopes you can use this for a topic of one of your essays, yes, my husband and I are the proverbial "aging baby-boomers" looking to buy a house with his VA benefits and not interested (so as to be able to sleep nights) in anything but a 30-year fixed mortgage.

What makes us different from others in this category who might be writing to you is that we have no children, no family, no heirs but The Nature Conservancy; and we view our buying rural property as OUR LAST HOME with no relevant consideration for estate taxes, amortization, refinancing, ever paying it off, or any other usual
worries.

My question, should you be able to turn this topic into an article about Vietnam-era vets using their VA benefits to buy their final home with absolutely no intention of ever moving again and being able, through employment, disability benefits, and--soon--social security, to make the payments until we shuffle off this mortal coil,

WHY SHOULDN'T WE SHOP THE LOWEST PAYMENT WE CAN GET AND NOT THE TOTAL COST, AS WE HAVE LEARNED FROM YOUR ESSAYS?

Thank you from the bottom of my heart for your altruism in promoting consumer education on what has to be the most dangerous and confusing transaction any American consumer will ever undertake: BUYING A HOME.

Cordially,

Item the first, payment is trivial to lowball. Let's take a more or less standard example based upon rates a few days ago. I had a thirty year fixed rate loan at 6.00% for two points. Let's say you were buying a $300,000 home, and chose that 6.00% loan. $300,000 at 6.00% is $1847.16 per month. However, that transaction has closing costs of about $3500 in addition to those two points, plus the VA funding fee of half a point if you're not disabled. This gives a balance of $311,282. and a payment of $1866.30 (VA loans are allowed to roll up to 3% on top of purchase price into the loan). By pretending that $11000 plus doesn't exist, I could quote a lower payment, and most lenders do precisely because people do shop by payment. But you're either going to come up with it out of pocket or pay the higher costs. Actually, in this case, that's about $2300 cash you're going to need to make the transaction happen, that they conveniently neglected to mention because you're above the 3% "roll in allowance". Furthermore, these aren't the only games played with lowballing. Most people are amazed at how much it's possible to legally lowball a mortgage quote. Nor do the new proposed regulations change this. If you're shopping by payment, someone who writes an honest quote on the above is going to look like a more expensive loan than someone charging another point or so, who figures on cannibalizing your Good Faith Deposit and still rolling the maximum 3% into the loan, but pretends this money is going to come from out of the twilight zone. VA loans are just as subject to pretending real fees don't exist as any other loan.

VA do loans have another simplifying feature - they only come in fixed rate loans. I haven't kept close track, but last I knew, it was not allowed to get a VA guarantee on a ARM, hybrid, or balloon loan. This eliminates the trick of them telling you it's a "thirty year loan" while not mentioning that it's not a fixed rate for the entire time. And if you're looking for 100% financing, it's not like the lender is going to substitute something else, given the current lender fear of the market. But it has happened in the past that people were told they were getting a VA loan, but it turned out that wasn't the paperwork they signed.

Last issue on this point, there is the question of whether the rate was really locked, and for how long. Mortgage Loan Rate Locks are for a definite period. The longer you want to lock, the more it costs. So someone who knows it's going to take 45 days and quotes based upon a 45 day lock is going to be at a cost disadvantage to someone who pretends that a 15 day lock is going to be the same, and doesn't actually lock the loan, but lets it float. Six weeks from now when documents are ready, your rate is 6.75% because the market has shifted upwards and your loan was not in fact locked. Alternatively, they locked for 15 days and you ended up paying five or six tenths of a point in extension fees - significantly less that the upfront difference, which is usually about a quarter of a point.

Item the second: People refinance, far more often than most people believe or are even willing to admit. You think that if you get that 6.00% loan today you're going to be happy forever. But then rates go down to where they can get 5.5% for that same two points, and they refinance. Or somebody comes along and sells them on a 5.5% loan that requires three or four points. There are VA loan companies that go around selling these, and they've got presentations that make it look like a good deal - which they are if you're one of the rare individuals who can resist them in the future. Problem is, they're going to be just as appealing then as they are now, and it's going to be just as good a deal then as it is now - providing you can resist future sales pitches beyond that. Let's look at how much money you've wasted if someone comes along and sells you a refinance a year from now:

Your choices: 6% for two points (plus VA funding and $3500 closing costs) versus 6.5% for zero points (plus VA funding and $3500 closing costs). Balance on loan 1 after 12 months is $307,459 Balance on loan 2 after 12 months is $301,615. You did save $740 in payments with loan 1, or $1150 in interest. The VA streamline does not require an appraisal, and can roll another 3% into your balance, so let's say you can get 5.5% for three points, which means a minimum of 1.5 points out of pocket, but you figure it's worth it to cut your payments. Your balance is now $316,680, and you spent $4700 plus in hard cash, to boot. $21000 plus in financing costs, to keep your payment low. If you get the "no points" loan to start with, your financing costs are $10650 in your balance and about $100 less out of your pocket, or roughly $15,000 - a difference of $6000, which is roughly $35 per month forever.

People really do get into this kind of refinancing loop, and actually it's worse than this becuase most people roll a month or two of payments in, plus the impound account. They just spend the money from the payment check they don't write and the impound account as well. I once spoke to a guy up in Riverside County who bought for just under $160,000, and the costs of serial VA streamline refinancing had driven his balance up over $230,000. This is real money. If they had just refinanced less often, or for lower costs, their payment would have been almost thirty percent lower, and he would have had sixty to seventy thousand dollars more equity in his property!

Issue the third: What happens in such a situation if you have a need for that money? It's gone. But aging people - particularly without heirs - develop needs for money. For instance, long term care expenses. I wrote a three part series on that quite some time ago, and here are the most recent updates one, two, three (The Republican congress later in 2006 repealed the so-called Waxman Amendment I reference in part two, but most states still do not have a partnership program). And it's not just long term care, either. You may have medical coverage and not need to worry about it, but I assure you that many seniors are not in such happy circumstances. You may be wishing at some point in the future that you had that equity available to you. I've met quite a few who did.

In short, there are a lot of traps lying in wait (or ready to be set) for the people who shop by payment. Whereas if you shop by the tradeoff between rate and cost, Ask the questions you need to, get a loan quote guarantee and/or a back up loan, doing what is necessary to have the lender take the pricing risk, the payment is the byproduct of these more important items. Payment is, after all, determined by simple mathematics.

None of this is to say it may not be a good idea to buy the rate down as much as you can. If you have a history of not refinancing for ten years or longer, and you swear a pact in blood not to refinance ever, no matter how good the deal, it is a good idea to buy the rate down with points. It also reduces your cost of money over time, if you keep the loan long enough that you recover the cost of those points. The drawback is that this puts a lot of money into what is effectively a bet that you're not going to sell or refinance for a long time. If something about your situation changes before you've recouped the money, that money you sank into the rate is basically gone.

For most folks, this bet is a very poor one to make. It makes the odds of successfully completing an inside straight look good. The outcome is under your control, but the vast majority of people who make this bet voluntarily let the house bank off the hook before they've recouped their wager investment. Nonetheless, it is a bet that can work out very well if you are a member of that tiny minority who does keep their loans long enough. In the example referenced above, the borrower who keeps the initial 6% loan the full term and pays it off will pay only $360,583 in interest, versus $389,042 for the 6.5% loan, a difference of $28,458, almost five times the difference in cost of procuring the loan. For your upfront bet investment of about $6200, you get your payment lowered by $61 per month and initial cost of interest by about $96 per month. If you keep the loan the full term of 360 months, you more than get your money back. But for the population in aggregate, that's a money losing investment, as the median time people keep their mortgages is about 28 months. Even if you double that, you're still on the losing end of the wager.

Caveat Emptor


PS I am intentionally not taking into account the time value of money, or the alternative uses for the money, but $6000 invested at 10% per year turns into roughly $105,000 in 30 years, and $34,500 at 6%, which would, by the numbers alone, be another reason not to do it.

Article UPDATED here


ACORN still up to its usual tricks (Not again. For it to be again they would have to have stopped at some point)

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Obama's Flips and Flops (150+ and counting)

His "Hope and Change" is sounding more and more like "I hope nobody notices I change every time I talk to a different audience"

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Record Setting Re-enlistment Ceremony. In Baghdad. On July 4, 2008.

You think the troops that are there might have a different perspective than the media's doom and gloom?

At he same site: Free and the Brave

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An Army of Durantys

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US removes Saddam's Yellowcake from Iraq

If you're one of those who still believes Iraq had no ability or intention of acquiring WMD, I have some beachfront property with a bridge and an albino pachyderm I'd like to sell...

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Post 9/11 dragnet turns up surprises: US Criminal records on Al-Qaeda terrorists.

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The Sky is Falling! The Ice Caps are shrinking! or not.


There are two main sources of bargain properties. The obvious one that everyone knows about is properties fresh on the market where the owner doesn't realize what they've got. This is the largest single reason why potential buyers obsess over days on market: They think they're going to find something nobody else has, yet. Unfortunately for this mindset, everyone else has precisely the same idea. Everyone else wants to look at that fresh on the market property, hungry for the bargain nobody else has discovered yet. As a result, this sort of property is where you get bidding wars as everyone else jumps on the same bandwagon, making the owner and the listing agent both very happy.

The "It's so beautiful!" property is not where you get a bargain, especially when it's fresh on the market. Actually, it's only when they're overpriced and the owner won't listen to reason that they get to the point where they aren't fresh on the market. People go to great lengths to make properties beautiful precisely because they will then command premium prices, especially when they're fresh on the market. This is another one of those trade-offs: You can buy a beautiful turn-key property, or you can get a bargain. Choose one or the other - you cannot have both. Choose wisely, by what is important to you. There is no sin or mistake in choosing to spend more money for a property where the work has been done. You are essentially saying that it's worth the extra money to you, and that's fine. This mistake is choosing the fixer when it's worth the money to you to have the turn-key, or in choosing the turn-key when would rather have the money (or can't afford it!)

The second, superior source of bargain properties is usually properties that have been on the market a while. They're not beautiful, so Mrs. Average Buyer does not swoon with delight at the thought of that kitchen and that bathroom. It specifically doesn't grab prospective buyers by the throat and say, "Buy me or you'll never be happy again!" If it did that, it wouldn't have gotten to this stage; it would have been bought when it was fresh on the market.

It may be old, it may be filthy, it may be cluttered, or all three. But the basic construction is still solid. This is not a Vampire Property, it just hasn't been updated in a while. There are no cracks in the foundation, no rot in the wood, no leaks in the pipes. There's nothing really wrong with it; it's just not beautiful right now. As a result, buyers will pass it by. They're too busy looking at the surfaces, looking for brand new granite counters and travertine floors that they don't notice that's what is there is quite serviceable and usually pretty easy to update.

Buyers don't swarm these properties simply because they don't know what to look for. They see fifty year old now. They're looking at what the property looks like now, not what it will look like after some very simple renovations that cost a lot less than the difference in cost between this property and the brand new rehab that's just been put on the market down the block. Some people think they know what they're looking for in a bargain, but most of them are wrong. This is one of the many places a good Buyer's Agent comes into the process. I've been around this particular block a few times, and I do know what I'm looking for and what it looks like. Lots of buyers will tell you they're looking for a bargain, but when the time comes to make an offer they just won't move off the dime. They're still hoping to find something for the same price with the work already (and freshly!) done. That's not going to happen. The reason the owners did that work was to be able to get more money for the property. You can pay the extra money (and the interest on it if you're getting a loan!), or you can go shopping for properties where the work is waiting for you. The folks who just remodeled in order to sell are likely to be disappointed anyway, but until they face reality, you're wasting your time.

Don't get emotionally attached to any property, especially if you don't own it yet. I tell people that if they're going to get emotionally attached, the best time is as I'm handing them the keys. Until the transaction is done, be willing to walk if it's called for. You're making an investment of several hundred thousand dollars. If that investment is going to be a problem or the owners don't want to let it go on reasonable terms, leave it to be their problem. They're trying to sell it; that's a representation they don't want it any more. If they make life too difficult for people who want to buy, that property is still their problem unless and until that transaction closes. I'd rather find my clients something else that's not going to be that kind of problem. Go through the purchase process with the mindset of, "I think I'd like to live here." Make the offer, reach the contract, apply for the loan, do the investigations, and go through subsequent negotiations and everything else with the idea that you think you'd like to live there - and be prepared for something to change your mind. many sellers, listing agents and loan officers all take advantage of people who aren't prepared to change their minds - and not a few buyer's agents as well.

The ideal bargain property is the same one it's worthwhile to remodel: Old, unfashionable, with poor lighting. Most folks won't even consider such properties, which is another reason why they go for attractive prices. Nor do a lot of sellers want to deal with the updates - putting cash out of their wallet for someone else's enjoyment. I'd say inherited property is probably the quintessential example of this. The heirs just want money; they don't want to come up with the cash that enables them to get a better price. This makes it a high supply, low demand situation. You're not going to be the envy of all your friends at the housewarming party the weekend after it closes, but a couple years down the line they're going to be asking how you got such a steal.

Caveat Emptor

Article UPDATED here


Obama's real patriotism problem

Suppose it's not broken?

The two biggest causes of economic problems in this country are excessive regulation and a high effective tax rate, not only via direct taxation but cost of regulatory compliance and fees for "government services" that nobody wants, but are mandatory. Not supposition - fact. Obama wants to make both of these problems worse. Add that to him wanting to completely bury the notion of entitlement reform, and he would be an economic disaster of such a magnitude as to make Jimmy Carter look good. At least back then, we could better afford what he cost us. But with the meltdown of the entitlement system in plain sight now, there would be no time to recover from an Obama disaster.

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Parade asked the presidential candidates, What is patriotism?

John McCain talks about Adams and Jefferson, and how they became friends again after their retirement from politics, and goes on to say:

I believe they would. Patriotism is deeper than its symbolic expressions, than sentiments about place and kinship that move us to hold our hands over our hearts during the national anthem. It is putting the country first, before party or personal ambition, before anything. It is the willing acceptance of Americans, both those whose roots here extend back over gener-ations and those who arrived only yesterday, to try to make a nation in which all people share in the promise and responsibilities of freedom.

Barack Obama has a good entry, also. But I don't think he gets it like John McCain does. I wouldn't go so far as to say it is country before anything, but I will say that I believe that patriotism is measured by what you're willing to give up for your fellow Americans. Making your own sacrifices.

We've got something rather special here. It can still be improved upon, and part of its being special is that we (as a people) recognize this. We may not agree what improvements are needed, but we can tell that something could be better.

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A picture that's worth a lot more than a thousand words

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Liberals, Conservatives, and Individual Rights

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Character counts

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The Battle Hymn of the Republic: Where it came from

For those who've been deprived of the history by public education John Brown

(This entry inspired by reading a reporter too lazy to run an internet search)

July 2nd, 2008

The guidelines for this carnival.

As always, I arranged the entries that met guidelines into three levels, based upon originality, usefulness to the consumer, and how much thought and effort and research went into an entry.

Folks, this was pathetic. I've got two usable articles this time. Everything else was a thinly disguised commercial solicitation - or even lacking the thin disguise. That's not what this carnival is about.

If this continues, the carnival will go monthly, or stop altogether.

STRONGLY RECOMMENDED

There were no strongly recommended articles this time.

RECOMMENDED

Silicon Valley discusses The Nuances of Real Estate Contingencies

An article taking a humorous approach to what goes wrong: Top Ten Reasons You Bought The Wrong House

SPAM AND OTHER RIDICULOUS SUBMISSIONS

What a post about Mommy's Medicine Bag has to do with real estate, I don't know. Some things are just beyond mortal ken - such as any possible excuse for submitting that post to a real estate carnival.

For those who might object to the treatment their submission received, the relevant information has been in the guidelines since before submissions were being accepted for this carnival. Having been told to read the guidelines, you willingly submitted these posts. Live with it.


Consumer Focused Carnival of Real Estate will return in two weeks (July 16th, 2008), here at Searchlight Crusade, unless someone else wants to host. Deadline for submissions will be July 14th. If I do not get a minimum of six usable articles for that carnival, the carnival will go monthly.


UPDATE: Everything submitted as of July 14th was either vapid spam or contained errors too big to ignore. Therefore, the next carnival will be July 30th, and the carnival will thereafter be monthly.

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About this Archive

This page is an archive of entries from July 2008 listed from newest to oldest.

June 2008 is the previous archive.

August 2008 is the next archive.

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