August 2008 Archives

August 31st, 2008

The guidelines for this carnival.

Last time, I said I needed to average twelve entries from the first two levels to return the carnival to every two weeks. This was not a cue to send or submit every piece of spam and irrelevant nonsense under the sun. One per author or website per carnival. Articles for consumers of real estate, not agents or loan officers, and ill-informed garbage containing more mistakes than good information will not be accepted, either. Commercial solicitation within the article is strongly frowned upon, and raises the bar for articles to qualify. The guidelines apply.

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, nor a request for duplicate submissions.

STRONGLY RECOMMENDED

There were no articles in this category this time.

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RECOMMENDED

Behavioral Finance - Use The Investor Psychology To Your Advantage isn't aimed specifically at real estate, but it's something to keep in mind.

The Ten Commandments of Finding College Housing makes some mistakes, but is a decent primer for college students.

How To Dispute Your Property Taxes is market specific, but covers an important point: If the property is worth less than the assessed value, you can get the assessment reduced. Be aware that in most places, it's not risk free. If it is determined that the property is worth more than the assessment, your assessment can also be raised. California, thanks to Proposition 13, is mostly an exception to this.

How Do I Know If I've Been Lowballed on a Mortgage Quote?

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MET GUIDELINES

You want to make money in real estate, Buy Low, Sell High. The way some people act, you'd think that was rocket science or something.

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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.

A site named Credit Solutions submitted a worse than useless article that did not so much as mention real estate. Clueless, clueless, and more clueless.

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.

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A little humor to top it off

Name your development carefully. Be careful how you pose, too.


Consumer Focused Carnival of Real Estate will return in one month on September 30, 2008, here at Searchlight Crusade, unless someone else wants to host. Deadline for submissions will be September 28th.

Beautiful! I love it!

The head fake with Pawlenty had me fooled.

McCain chooses Alaska Gov. Sarah Palin as running mate, campaign officials say

John McCain tapped Alaska Gov. Sarah Palin, a conservative who shares his maverick streak, to be the Republican vice presidential running mate on Friday in a startling selection on the eve of the Republican National Convention.

Palin's problems? Her home state is safely GOP, so delivering Alaska doesn't add any electoral votes to the R column there. She's been accused of firing a subordinate because he wouldn't fire her ex brother in law from his state trooper job. She's made enemies within her state GOP for her maverick crusade against corruption and pork. She's light on experience at the level necessary - Governor for two years.

Palin's bonuses? She's not in the top spot on the ticket - Nobody ever said Obama wasn't qualified for Vice President, which would give him time to learn what he needs for the top spot, and as young as she is, her experience is still greater than Obama's. The Democrats can't argue that she's too inexperienced without undercutting Obama. Particularly her executive experience is greater than his. Matter of fact, Palin's career reminds me of a certain other young vice presidential candidate.

She has a long history of being anti-pork and anti-corruption, being even more willing than John McCain to root it out, even when practiced by Republicans. Given four years as Vice President (or eight) she'd be ideally suited to run for President next cycle.

Finally, of course, she may not bring in Alaska's electoral votes, but that's thinking small. She gives McCain a good solid wedge to appeal to not only former Hillary supporters in all fifty states - which will likely move a critical number of states into the R column, but she forever shatters any illusions about Republicans keeping women down. Palin's a working mother - and one of her children has Down's Syndrome, and I think she's the first serving governor to have given birth while in office.

I don't think anybody except McCain's inner circle was expecting this. This is masterful political judo on somebody's part in the McCain campaign. Yeah, I think Romney would have brought more credibility to McCain on the economy (far and away the most important issue), but Vice Presidential candidates are selected for their ability to help the presidential candidate win the election. Call McCain-Palin the PUMA slate. Appropriate in a lot of ways, not just from the Democratic, but the Republican side as well. But her selection gives the ticket a lot more, electorally, than it takes away, it forever removes the Democratic ability to slander Republicans as the party of white males, and it sets up a very strong presidential candidacy for her in four (or eight) years, helping secure the future of the Republican party.

I have made no bones about the fact that I much prefer John McCain to Barack Obama. This is a move that makes it much more likely that McCain will win the election, barring some weird revelation about Governor Palin. Where Obama chose the ultimate insider, McCain took a risk and went the exact opposite direction. I think it's going to pay off for him.

Well done, John McCain and Sarah Palin.

UPDATE: Ed Morrissey covers the advantages of Palin wonderfully. Best quote:

Finally, based on all of the above, McCain can remind voters who has the real record of reform. Obama talks a lot about it but has no actual record of reform, and for a running mate, he chose a 35-year Washington insider with all sorts of connections to lobbyists and pork. McCain has fought pork, taken real political risks to fight undue influence of lobbyists, and he picked an outsider who took on her own party -- and won.

Who talks the talk, and who walks the walk?


Neighborhoods of La Mesa: Connecticut Avenue

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The Obama campaign is trying to suppress an campaign ad. Indeed, they want to file charges against the man who sponsored it

Meanwhile, Obama himself is funneling money to ACORN for advocacy work through a false front.

Hope and Change? The introduction of totalitarian (see: China, Hugo Chavez, Robert Mugabe)tricks to intimidate political opponents probably isn't what most of his backers have in mind.

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Way to stay classy.

If Rush Limbaugh or Sean Hannity was saying something like this about Markos Moulitsas, what would the reaction be?

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Michael Totten: The truth about Georgia

Like MIchael Yon, He's supported by reader donations.

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A classy move by John McCain In a switch, McCain to Obama: "Well done"

Congratulating him on becoming the nominee, and spending his own campaign funds to do it.

Found it on You Tube

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This could be indicative: McCain VP possibility cancels Denver appointments

Minnesota Gov. Tim Pawlenty, in Denver to help provide counterattacks against the Democratic Party convention, canceled participation in a news conference and other appearances, a Republican official said.

It was unclear whether the cancellation had any significance to McCain's vice presidential search.

What other reason could he have for suddenly canceling appointments? A sudden illness in the family about covers it, and if that were the case, he would have said so.

Pawlenty is 47 - the same age as Obama. I think Mitt Romney or California's Duncan Hunter would be better, electorally, and help more in the actual governing, but Pawlenty is more of an outsider (always an asset), and his political agenda isn't quite so hardened. There's also the relative youth factor to consider. Assuming McCain wins and retires after one term, Pawlenty would be just about perfectly placed to succeed him - something Hunter will never do, and Romney would be getting up there in age as well in another 4 to 8 years.

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Dog Bites Man. Another ACORN fraud in Ohio?

ACORN has a long history of alleged fraud in their registration drives. All of their improprieties have gone to the benefit of Democrats, and Democrats have not stinted on their appreciation. Here in Minnesota, failed gubernatorial candidate Mike Hatch diverted thousands of dollars to ACORN from a lawsuit settlement as Attorney General. Democrats in Congress sent millions to ACORN as part of the economic stimulus plan in February and in the housing bailout bill in April.
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I expect the cold hard fact to have zero impact on how the economy is reported: Economy grew 3.3% in Q2.

Thus far, we have yet to have a single quarter of negative growth, and 3.3% growth is pretty darned good. But certain media groups, determined to paint George Bush as a failure, are spinning everything down.

Or could it be that we've just gotten so spoiled by nearly eight years of good economy under George Bush that slower growth feels like a recession? Or (say it softly) are they using the collapsing news business as their metric?

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Is America Ready To Send Its Political Opponents to Jail?

Most totalitarians at least wait until after they're in power to suppress the opposition.

More on Obama attempting to suppress information at Q and O

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They told me if George W. Bush was elected, political dissenters would be marched off to jail in leg irons and denied attorney representation. And they were right! Denver Protesters denied access to attorneys, forced to march in leg shackles

The ACLU issued a stinging rebuke to the Denver Police Department Wednesday, alleging that the department may have violated laws and constitutional rights of protesters arrested outside the Democratic National Convention.

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Speaking of the previous item: Here's what real oppression looks like:

Statement from the Family of Imprisoned Opposition Leader, Hassan Baoum


This has always been a portion of the market, but right now, more and more people are emphasizing it, or at least the ones who are able.

Actual Rent to Own is rare these days, a sign that the market is being driven by sellers, selling to poorly advised buyers. I can't remember the last time I heard of one happening, because there is an actual ownership interest right away, and the buyer is entitled to a share of the money put into rent, whether or not the deal is actually consummated. On the other hand, Lease Option seems to be a common Idea of the Moment, because the prospective buyer basically gets nothing if they don't want to buy, or if they cannot qualify for the loan.

Just like any other purchase contract, everything about these is negotiable, but the basics are thus: Buyer and seller reach a purchase agreement, with the date of actual purchase delayed by some amount of time. In the meantime, the agreement is for for the buyer to rent the property, usually for an above market rent. Part of each payment gets set aside for the buyer's down payment if and when the option is exercised. The difference between Rent to Own and Lease with Option to Buy is that in Rent to Own, a part of each payment is actually due back to the buyer if they decide not to buy, whereas in Lease with Option to buy, that money is just gone if the option to buy is not exercised.

Why do this?

For the prospective buyer, it's a way to engage in forced savings for a down payment. If rent is $2000 per month, with $1000 being credited to the buyer and $1000 in rent, over a period of two years, you've got a $24,000 down payment, and this is treated exactly like any other down payment, except that the seller already has it, so you only have to come up with the purchase price less this down payment money. This is useful for people with rotten credit and/or poor savings habits, especially if credit is expected to improve withing the time frame of the agreement. It's horridly inefficient, and I've never seen a residential situation where it wasn't better to buy outright, but if you have a problem qualifying for a loan or saving for a down payment, this is one way to go about dealing with that problem. With 100% financing currently dead except for VA loans and a few Municipal first time buyer programs that run out of money at warp speed every time they get a fresh allocation, this is one way for people to get their foot in the door of property.

For the seller, it's a way to create a captive purchaser. These buyers have rotten credit and/or zero dollars for a down payment. Nobody else can do business with these buyers, because the buyers will not qualify for the necessary loan. They have Hobson's Choice: This one or none at all. This creates bargaining power for the seller even in the strongest of Buyer's Markets, because most sellers in such markets do not have the ability or willingness to offer a Lease with Option to Buy. They're not as powerful as offering a Seller Carryback, but they definitely give sellers pricing power they would not otherwise have. You can get an above market rent and an above market price, to boot, and the prospective buyers are more motivated than your average tenant to take good care of the property.

So why isn't everybody doing them?

First of all, the reason the seller has the property on the market is because they want or need to sell now, not two years from now. With either rent to own or Lease with Option to Buy ("Lease Option"), they aren't getting any equity out of the property now to enable them to buy their next property. Furthermore, they've still got all of the expenses of owning that property. Finally, the reason that buyer can't buy anything else is because the most generous assessment of their financial skills possible is "Needs improvement." Bad credit does not, generally speaking, happen like a lightning strike out of a clear blue sky. It happens because they don't pay their bills on time. There are some exceptions - mostly people who had major unexpected medical expenses, but there are limits to how badly one account can hurt your credit. Chances are high that they'll be late with the rent - which is money you're counting on to pay your mortgage, your property taxes, your insurance, etcetera. It takes a certain financial solvency to be able to offer these. Not to mention that until the tenants exercise the option to buy, you still own that property, which means you've got all of the headaches and obligations of being a landlord, or you're going to have to pay someone else to take care of them. Repairs, maintenance, etcetera.

For buyers, the prospective pitfalls are even worse. First, you're paying above market rent and agreeing to a price that is usually significantly above the current market. It might be below market when you actually exercise the option, but right now, it's almost certainly a goodly premium over the price that you can get similar properties for - because they're offering something extra that most sellers are not willing or able to offer, and if you didn't need it, you wouldn't be willing to pay for it, right? If you don't exercise the option to buy, the extra rent money you fork out is basically gone. There has to be equity in the agreed upon sales price, and there has to continue to be actual equity. No lender in the known universe is going to approve a short payoff for a Rent to Own or Lease Option, no matter how ironclad your contract. If the current owners lose the property to foreclosure, you're basically SOL. And it wouldn't be the first time sellers pocket the rent while not paying the mortgage, or even taking a cash out refinance. I'm not certain what the law is on this point, but I don't see a way to keep the current owners from doing any of this. It's a good idea to record the option, but that doesn't mean anything if the lender forecloses or is owed more money than the strike price. You can sue, but suing broke people is throwing more money down a black hole from which you're not going to recover it. Finally, and here's the rub that kills a very large proportion of the prospective buyers who enter into these agreements: You're still going to have to qualify for a loan for the rest of the agreed upon purchase price ("strike price") before the option period expires. Usually the market goes up, but sometimes it does go down, and the appraisal is less than the purchase price. If you can't make up the necessary difference between the biggest loan you can get and the strike price, you're not going to be able to buy. For that matter, if interest rates go up significantly, you could find yourself unable to afford the payments on that loan. In fact, these two phenomenon usually go together. Rates go up, therefore payments and cost of interest on the same number of dollars rises. People in the aggregate cannot afford to pay as much for real estate as they could formerly, and therefore, prices fall. Basic economics.

There usually is a significant deposit made, as well. Not as much as a regular purchase contract, but just because there's a time delay involved doesn't mean the seller isn't going to demand a deposit they can keep (maybe), or rent to a tenant without a deposit. The rules on whether they can keep a tenant's deposit are also somewhat different and more advantageous to the current owner than California's renter-landlord law generally is (Don't ask me - I'm not a lawyer. I'm mostly parroting what I've been told on this point).

The prospective seller is entitled to do all the due diligence than any normal prospective seller or landlord is, and ditto the prospective buyers/tenants. Personally, I would want that inspection contingency period to run the full duration of the option period, and there really isn't an effective loan contingency period, as the owners already have the prospective buyer's money, and most Lease Option contracts are pretty solid upon the point of not getting it back. This point is negotiable, but usually that money has already gone to pay mortgage, property taxes, etcetera. What did I just say about suing broke people?

Rent to Own real estate and Lease with Option to Buy real estate are always a risk for both parties. The tricks are myriad, at the very least. This is not something to try without a very sharp agent representing your interests, and as for dual agency in this situation, I have it on excellent authority that slow roasting yourself while basting with acid is less painful for prospective buyers. With that said, if the situation is right and both parties act in good faith, it can be a way to make both sides of such an agreement very happy, when otherwise they would both have been very unhappy. The seller gets an above market price, albeit delayed, and a much improved cash flow in the meantime. The buyers can buy property, where otherwise they would not be able to.

Caveat Emptor.

Article UPDATED here


People always assume they'll be able to refinance later. Even most of my articles have it as an implicit assumption.

But what if you can't refinance later?

There are situations where it happens. Many situations, as millions of people are finding out now. Roughly 2% of the new search engine hits I'm getting this past month or so are from people who are looking to refinance into anothernegative amortization loan. Anyone who hasn't been living in a cave knows that's not going to happen, as Wall Street has finally figured out that they're not good investments. But people don't pay attention to most real estate problems until they're smacked in the face with a cold haddock. With a half million dollar investment on the line, this is roughly equivalent to pigs following a swineherd to the slaughterhouse, but people still do it.

It is one thing for an investor who can afford to lose the entire investment to make a bet on the future of the market. If they win, they win. If they lose, the investment may be gone but they've still got a place to sleep for the night. It was a calculated risk where the dice came up snake eyes. Never any fun to have happen, but survivable. Furthermore, in order to be able to win, it must be possible for you lose.

It is something entirely different to counsel someone to make a bet they cannot afford to lose. If the consequences of a losing bet include homelessness, bankruptcy and might as well be permanent damage to your credit rating which makes it impossible to get started again, that's a different category of bet.

Real Estate loans, done wrong, are a "bet the family future" type bet - on something that nobody involved in the decision making process can control. Not the consumer, not the loan officer, and definitely not the real estate agent who says, "I know someone who can do the loan, and the Payments will be affordable.

There are several things that can prevent someone from successfully refinancing. Some of them may be somewhat under consumer control; most of them are not. These include:

Time in line of work: You can change employers and not fall afoul of this, but changing from employee to self-employed (or vice versa) can mean you don't qualify.

Documentation of income can mess you up more than anything else, often for the same reason that time in line of work does. You were getting a regular paycheck and a W-2, now you've gone to self employed, the clients have been a little slow in paying, and you've been very certain to take all of the legal deductions on your tax form. Good for your tax bill, not so hot for your ability to qualify for a loan, particularly if you've had to put more than usual on credit. Once again, the interest expense for business items may be deductible, but it can also put a huge crimp in your debt to income ratio.

Changing from owner occupied to investment property can sink you, particularly with a loan to value ratio over 80 percent. Your employer says you can keep your job, but you've got to move to Timbuktu, which means you can't live here any more.

Loan guidelines change over time. This one has been a killer problem for a lot of folks of late, as guidelines have tightened more in the last few months than they loosened in the previous ten years. No more stated income, no more 100% conventional financing, no more 95% conventional financing, as neither PMI companies nor second mortgage lenders will touch it right now. The only way to go above 90% loan to value is FHA, VA, or seller carryback, and even that last may not be acceptable to some lenders, and when you refinance most carryback sellers expect to be paid in full. Even the down payment assistance programs are essentially dead (They officially die September 30th). Even if you are one of the folks who still theoretically have significant equity, you may not be able to refinance into something sustainable.

Then there are market problems. If the property has lost value from when you bought, you may owe more than the property is worth. More than a year ago, I wrote about what a pain it is to refinance when you're upside down, as well as the fact that it's not likely to be an improvement over what you've already got.

I wrote Losing Property Value with Highly Leveraged Properties in March 2006 (updated just a few months ago), when people were still in denial about the problem, or thinking it was somebody else's problem. But the problem is always a possibility, and it's no respecter of anyone's stress level. Life is what happens while you're making other plans.

With this in mind, at least for your own principal residence, you want to have a sustainable, fully amortized loan in place, with a fixed period of at least five years. Actually, I'd be more comfortable with shorter fixed periods now that the air is out of the market. Even if we do lose a little bit more, which I don't think we will here locally, by the time three years are up, values are very likely to be at least 20% higher - and you will have paid down the loan by several thousand dollars. But most people who chose shorter fixed period loans, or Option ARMS (which have no fixed period at all) was the low initial payment allowed them to appear to qualify for the loan for a more expensive property than they could really afford. This is precisely the reverse of how it needs to be done: Figure your purchase price budget using an available thirty year fixed rate loan, and then if you want a loan with a shorter fixed period in order to save interest and closing costs, you still want to stay within the same purchase budget, not choose a loan because that's the only way you can afford the payments on this property that's way beyond your budget. Lest you now have figured it out yet, that's a recipe for personal disaster of a sort that takes many years to recover from, and some people never do recover from it.

For this reason, having an unsustainable loan, where the payments are going to adjust to something you cannot afford later, can change the answer to "Is it a good idea to refinance?" from "No - the available tradeoffs between rate and cost don't save me any money (or don't save enough)" to "Yes - I need to move to a more sustainable loan, and if I don't do it now, I may not be able to qualify later." If the market value of the property may be ripe for deflation, if your employment or income may become unstable or undocumentable, if your payments are predictably going to adjust to something unaffordable within two to three years - in all of those situations I have advised people that refinancing may not put them into what appears to be a better situation now, but if they wait, their current loan is going to become unaffordable and there is a serious chance they will not be able to qualify for another loan when it does. Sometimes the situation can be as simple as loan guidelines are likely to tighten up later - I predicted the demise of 100% conventional financing as a consequence of market deflation over three years ago. Being temporarily "upside down" on your mortgage or having insufficient equity to refinance well under current guidelines is not a big deal if your loan is a fixed rate fully amortized loan, or even a medium term hybrid ARM. The loan is in place, on terms that you can handle. You keep on making those payments, your lender is happy, your pocketbook can handle it, your loan balance decreases, and prices will come back - sooner than a lot of people think, in the current media hullabaloo. In a year, or two, or three, you'll have equity, be able to sell for a profit, your job or income will be stable and documentable again, and the rough patch will be behind you. It's what happens when you need to refinance now and can't that gets folks into trouble.

Caveat Emptor

Article UPDATED here


Carnival of Real Estate

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This is what political repression looks like: Imprisoned journalist denied insulin and family visits

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Obama introduces running mate Biden

At 3 in the morning, via text message, Obama chooses Joe Biden to be his running mate.

And here I really thought Obama's experimentation with recreational drugs was decades in the past. This seems to be evidence that I was wrong.

Joe Biden has a paper and video trail decades long of saying stupid things, politically incorrect things, and things that just plain piss people off. Not to mention he's about as "insider" as it comes, and has all the lobbyist ties that the opposition research folks over at the RNC will love.

If I were trying to come up with a pick for Obama's VP that says his campaign rhetoric of "hope and change" really is as empty and fake as everybody suspects, I couldn't have come up with one as good as Joe Biden. And if I was looking for a Vice Presidential choice that told anyone who pays attention to actions that any move to the center I pretend to make in the general election is an act, Joe Biden (after Obama, one of the most left wing senators) would show up second or third on that list, too.

Yeah, I favor McCain. But this was a stupid, unforced error on Obama's part. He had at least half a dozen better choices available to him. I'm still wondering if Hillary has a couple hundred convention floor aces (aka superdelegates who have only been pretending to be Obama supporters) up her sleeve. But if I were a Democratic supporter, that's what I'd be praying for right now, instead of wondering.

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If you're a dog lover, particularly a dachshund lover, these folks will shortly have a large number available, due to a puppy mill raid.

HT: Don Surber

Dan,

Okay, so now I'm in the process of just making an offer on a house and it's already getting confusing despite all my reading. It would have been worse has I not spent all this time reading but just when I think I have a solid grasp of this process something else springs up.

The agent is saying that with the offer we have to say who the lender is and if we change lenders we have to ask the seller for permission, basically, since it's a part of the offer. Is that normal?

It's a short sale (seems like everything we look at is!) and on the home there are two loans. This is what I heard from the sellers agent. The first lender signs off on just about any offer (and so far I'm told there are offers all the way to $189k) because for the most part they're going to get all their money back. The second lender has not signed off on any offer so far but the sellers agent says if you offer X (it's $199k in this case) they'll take it. First of all, how can the sellers agent even go into details like that? (And he told ME because I called him after I talked to our agent because I couldn't believe she knew all those details about first and second loans and what the second lender would settle with.) Second, how would he know how much they would settle for and third, why would that lender tell anyone what the lowest they would take is? Seems to me this is all speculation on what that second lender might do.

Okay, so the asking price is $199k and my agent knows we have about 3.5% saved, that's it! So we go and get pre-approvals from lenders for $200k. So far so good. Then we find a house we like and the asking price is $199k. And we lean that if we offer the asking price chances are it'll get accepted (usually we learn that there are 3 offers already and we need to offer more . . . yes, even in the down market!). Once I finally get over the fears and decide to do it the agent tells me we should offer $204,500 to cover closing costs. WHAT? I'm confused again.

Any light you can shed will be greatly appreciated.

I don't know much about your market and its current state. Some things are appropriate in some buyer's markets, but will only get the door slammed in your face in seller's markets. On the other hand, some things are necessary in seller's markets, but are giving away far too much in buyer's markets, and there is an entire continuum between buyer's markets and seller's markets. Handling offers and negotiations in a manner inappropriate for the current market will pretty much guarantee failure, either by asking for something so outrageous that the door metaphorically gets slammed in your face, or by giving away all sorts of things including money that there is no need for. To know what is and is not appropriate, you need an agent who knows your local market, who's willing to really work on your behalf, not just fax offers back and forth.

As far as the lender goes, I have NEVER named a buyer's lender in a purchase offer, and I'm not about to start, for precisely that reason - and the fact that its none of the seller's business. But it might conceivably be part of the standard contract in your state, for reasons I don't understand, being a California boy. Some state laws are a bit, shall we say, different? On the other hand, some lawyers I'm aware of could build a serious case that this particular item, however, is a RESPA violation, which is federal law and applies everywhere in the US.

It's easy to figure out approximately how much they owe. The original dollar amount of existing liens is public record, everywhere in the US. From there, you can make a pretty good estimate of how much they owe. Not that it's generally a good idea to focus on what is owed. Whether it's free and clear, or upside down, the property is only as valuable to you as it is. You're not going to pay $400,000 for a property that's only worth $200,000 if they're upside down. Neither is there any reason to be willing to pay less if they own it free and clear. It's still worth what it's worth, and failing to understand that, by either the seller or the buyer, is a recipe for failure. Buyers do not care what a seller "would like to get," and sellers don't care about what a buyer can afford except as it applies to the question, "Can they afford this property?"

A short sale is a short sale is a short sale. Unless there are reasons like "pretty much everything is a short sale", buyers should avoid short sales. Even done right, it's a month and a half or more process of the lender trying to beat everyone up for more money by wielding a VETO. If you do decide that you want that particular property badly enough to fight through the short sale process, I wouldn't start by accommodating the lender. They're still going to try to beat you up, only they're starting from a better point for them and a worse one for you.

As far as over offer to cover seller paid closing costs: We do live in a net world. Are you asking for seller paid closing costs? You shouldn't if you don't need to, but if you are, it's kind of like an equation. If X, a price they will accept on an offer without seller paid closing costs, equals $200k, then X plus $5000 for closing costs is $205k. Actually, since they pay commissions on the higher amount, you should feel lucky if they agree to a price that doesn't add anything more than the closing costs cost them.

The critical questions I usually ask are: Suppose you get it at that price. Happy or sad? Suppose you don't get it at that price, but someone overbids you marginally and does. Angry, or don't care? Finally, how many real competitors for your business are there? Is this property head and shoulders above everything else with a comparable asking price, or are there hundreds of others just as good, that you could just as easily make an offer on and be happy with? The answers to these questions will help a good agent determine what a good offer is, and what it isn't. A bad offer can poison the well, and a too good offer gives away too much. You want the property on the best terms possible, but you do want the property. If you're a flipper looking to score on a low ball offer, you don't care if you poison the well (you're pretty going to walk away if they're not desperate enough to take the first offer or something close), but pretty much everyone else does.

From your email, I'm getting suspicious there's some tendency on behalf of that particular agent to inflate the price so they get paid more, and possibly even collusion. But there's no way to be certain, and no way to tell that it's even the way to bet without knowing more about your market. Only another agent in your market would know about that, which is one reason why any specific negotiating advice you're going to read in a forum with a national audience is so much wasted breath at best. There are possible exceptions to everything I've written in this article, and I know what they are and where they would be applicable, but it all has to do with a given local market at a given temporary time or specific situations where you're going to be getting something extra in exchange for giving up something that isn't normal. For anything beyond a particular local market under particular market conditions that apply in a very time limited fashion, detailing these would be so much wasted space on the page. All of this is one more reason you want a good buyer's agent on your side before you start looking at property. Dual Agency is a recipe for disaster for buyers.

Caveat Emptor

Article UPDATED here

All too often, these days, I have to tell desperate people who've found me on the internet some bad news.

Nobody can match the rates they've got at a price worth doing.

This is just a sample of what I've seen:


I bought a house in DELETED in Aug 04. It was my first house, and I was pumped about it. Now, it's become a liability. I want to leave soon, and pursue an (advanced degree). I've been extensively preparing for my (test), and I expect to qualify for some 'almost top-tier' schools out east. So what do I do with my house? Bad market = hard for me to sell.


I am looking to rent my house out. The largest hurdle comes from the fact that DELETED has very low rents, and very high housing prices. To give you an idea, a typical 4-plex has a yearly NOI of around 5% of the total property cost. Yeah, a 5% return. My mortgage (I'll detail it later) costs $1500/month (PITI). Market rent is about $1k-$1200/mo. I looked at other mortgages, but it seems to me that most brokers are a waste of oxygen. You say what you need, and then they offer you a loan that makes them the most commission. I had a few people try to talk me into a Neg AM/option ARM loan. I did some math... Total waste of money. What I need is something to lower my payment while I hedge my position.

Rents are increasing, and I believe that the market will be less of a buyers market in a few years. I am working with a mentor and put together a Lease to Own deal, which may solve my issues, but I would like a Plan B.

My house is worth no less than $268k (zillow estimate, I think it's low. $275k would be better) I owe ~$253k

I have an 80/20. The 80 is 5.125% interest only for 5 years, then goes ARM on me. The 20 is a HELOC currently at 10.125%. My FICO is between 750-775. The property is located at DELETED. It is a normal detached house. This would only be a refinance for a few years, until I can sell the property in a better market, but if a locked option presents itself, I would continue to rent that place forever! I don't need any cash out money, but I will take any available, because I am getting around 10% return on my Funds.


Now this particular person makes some errors in his thinking and in the email, but they're forgivable in non-professionals. The meat of the matter is that he, like so many, cannot afford the current payments under the new circumstances.


This guy has a 5.125% interest only loan. When I originally wrote this article in February 2007, I could just barely do that with one lender for something north of four points, and could not do 5.00 at all. Even if adding roughly $15,000 to his loan amount was worth keeping the same interest rate a little longer, just the fact of adding $15,000 to his loan is going to raise his payments. At this update, I don't know of any lenders offering the rate at all.

In this case, like so many, there literally was and is no loan I can do for this person that's worth the cost of doing it. I could cut his payment for a while with a negative amortization loan, but only at the cost of raising his real interest rate about 3%, which means it's really costing him about $6000 per year extra, while sticking him with a prepayment penalty in the area of $8,000. A classic case of pay me now, keep paying me, and pay me later, too. Well, I couldn't do that to anyone, much less someone wearing the uniform in times of war, as this man is. Even if this guy had been in California, I would have told him the same thing I did: There's no loan out there that will help him in the classical sense of the word help. What he needs is cash flow and time. A negative amortization loan would provide that, but at a much higher cost later - too steep for me to believe it's worth paying. A lower interest rate or longer amortization or even interest only might help some people, but none of those options make sense for someone who has already got 5.125% interest only. I could have tied 5.125 by adding over four points plus closing costs to his loan, but I don't need to consult my rate sheets or get out the calculator to know that adding $15,000 to break even on the interest rate is not going to really help him.

Now, this is not to say that refinancing into a higher rate is never justified. If it was going to do something he needed it to do and it makes sense in other ways, yes, I can see it. For instance, if he was going bankrupt due to some bills, but consolidation would prevent that from happening, it might be the lesser of two evils. But that doesn't appear to be the case.

Now when his loan hits its first adjustment, chances are pretty much 100% that I'll be able to do something worth the cost of doing it. Until then, however (or rates drop enough), the fact is he's better off sticking with what he's got right now. But that adjustment would be to roughly 7.25% if it happened right now. Whatever it is, the way that rate adjustments work is underlying index plus a set margin, determined by your contract. Lenders think of hybrid ARMs as teaser rates; they're always offering rates less than the index plus the margin to start with. Which is one reason to be careful with hybrid ARMs. I love them, I do them for myself; but they will go up when they adjust if you keep them that long.

This man is only one of millions out there in similar situations. I can't speak to his specifics, but there were lots of people who bought with loans such that they could only afford the payment interest only or worse. The fact of the matter is that they were poorly advised, or not advised at all if they kept everything quiet and never told the person who might have warned them. They probably should not have bought the property they did, but somebody talked them into it. In most cases, it was someone with a fiduciary responsibility to them who should have known better.

I don't have a problem with interest only loans as purchase money. I do have a problem with negative amortization loans as purchase money for a primary residence. Interest only, though, can be okay if they can afford the fully amortized payment but choose not to. For instance, this gentleman could have afforded more, but was getting a better return on his money elsewhere. Sophisticated user and all that. He knew the risks going in, and chose to take them. For those who were advised of the risks and chose to take them, that's what risk means and why you get the payoff for taking it when you win - because sometimes you lose.

However fantastic an investment real estate is, it is not a risk free investment, and sometimes the bet does go sour. Members of the real estate profession were doing all they could to push rapidly appreciating prices, and members of the loan profession were doing everything in their power to aid and abet. Both groups were pushing past results to illustrate future performance, and I saw or heard the phrase, "nobody loses money on real estate," so often and in so many places I even stopped getting angry at it for a while (You can't stay angry all the time). Both groups were pushing people into bigger and bigger loans for bigger and bigger properties, and more and stronger bidding wars, and rationalizing it on any basis that happened to be convenient and hadn't been debunked in the client's presence within the last fifteen minutes.

Once again, I'm embarrassed by members of my professions, and not just for their self-avaricious advice to the unwary, but also for their limited understanding of economics and markets. Trusted professionals are supposed to know better. People with fiduciary relationships are supposed to know better. People earning thousands of dollars more for their "expertise" per transaction should definitely know better.

So what do you do if your payment goes up, and the best rates available to you don't help the situation enough?

Sell for what you can get.

Right now, this is a really rotten thing. Many markets are in the tank completely. If you don't need to sell, you shouldn't be in the market when there's thirty sellers per buyer. That being said, if you can't make the payment, selling is the least bad alternative available to you. Even a short sale is not as bad as being foreclosed upon, and if you don't make the payments somehow, foreclosure is going to happen. It's only a question of when. You want to have sold before that happens.

There are a very few exceptions. But pretending that you are one of them when you're not is a good way to take a very bad situation and make it worse. The first rule of getting out of holes is to stop digging, and denial digs deeper than anything else.

Please, if you're in such a hole, don't keep digging. Or at least start digging out rather than deeper.

Caveat Emptor

Original article here


San Diego Special Edition

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Another entry in my neighborhoods series is up: Neighborhoods of La Mesa: Griffen Park (Murray Street)

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Sad, but true: My most popular article the last two months solid has been Deficiency Judgments: Recourse Loans vs. Non-Recourse Loans.

I write most of this site hoping that people will do a little bit of research before undertaking a half million dollar transaction. Judging by the search terms, that does not appear to be the case.

Getting Out of Paying Pre-Payment Penalties is another perennial favorite, and the search terms I get that lead to that aren't any happier.

Did nobody teach these people the old saw about an ounce of prevention? In real estate, it's a gross understatement.

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Victor Davis Hanson lays the smackdown on an expatriate with rose colored glasses towards his adoptive country.

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Absolutely vile. These were living, viable infants, alive but discarded with the trash.

I think abortion needs to be legal, but once they're outside of the mother and alive, there's another term that needs to be used for killing them or allowing them to die of neglect. "Abortion" only applies when they are still within the mother.

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While we're at it, if this is a departure from politics as usual, I don't like direction it's going A nexus of cronyism at UC Medical Center?

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You want repression? They'll show you repression

from an email:

I had a mortgage refinance done in 2001. The loan officer did not show up for the closing and I never received a good faith estimate before closing only word of mouth figures. At closing the "fees" were outrageous so I advised the closing attorney for the title co. that I was not comfortable with the terms and I did not want to go through with the refi. He insisted that I sign the paperwork and was adamant that I have a three day right of rescission. I was given a small check at closing which was never cashed. I thought about it and exercised my right of rescission on the same day of the closing and the lender received the rescission form on the third day. I have proof it was received. I even sent the normal payment to my current mortgage company who returned my payment. Then lender funded the loan the very next day and I have been in a battle with them ever since. They have constantly told me they were going to correct the problem to wait and it is now 2008. I never received a normal request for payment only late notices every now and then in which I repeatedly faxed the rescission form over and over again. They held an illegal lien recording for 4 years and my credit was ruined. They tried to foreclose twice in 2003 and 2004 which was unsuccessful. They claimed they never received proof that I rescinded the loan. They even sent me proof that they paid my old mortgage co (date stamp of clearing on the third day), and the check was drawn on the title co. Now they are suing me for the money paid out to my prior mortgage company saying that I owe them money. The suit was filed 4.9 years after the original refi date. They finally cancel the mortgage recording 9 months prior to filing the suit in which I was never made aware of until the suit. I went to the court house to get the proof myself. They now acknowledge that I did rescind the loan but they made a mistake. A 4+ year mistake!!!!!

Do they have a right to anything due to the rescission law. The form that I sign says that nothing should have been done prior to three days and if so there was 20 days to correct not 4+ years!!! And they are suing me!! Please any advise you can give would be helpful

First, most important piece of advice: Get a lawyer. Now. I'm not a lawyer, and even if I was, I wouldn't know law and precedent in your state (which isn't mine, because California's an Escrow and Title state).

When you have chosen a lawyer, ask them about grounds for you to sue the mortgage company and whether they'll work on contingency if you can't afford their regular rates.

Talk to your lawyer about getting whatever agency handles mortgage licensing in your state involved. Write a formal complaint letter, send it return receipt requested. That way they can't sweep it under the rug. Also talk to your state legislator if you have to, to motivate that agency to move.

Sad to say, this is likely very much a case of big trying to push little around because big has the resources to fight and little doesn't. You might want to talk to your lawyer about equalizing that, because big means they also have more to lose. Ask your attorney if it's a good idea to approach a reporter for your local paper. Be careful and listen to your lawyer on what to say and what not to say if you do. One slip in this regard can make things even uglier than they started out. It may be a better idea to let the lawyer do the talking here.

Find out if these malefactors been reporting late payments and non-payment to the credit bureaus, in which case you may also have a tort for that. When they have no legal basis to demand payment in the first place, it's defamatory to claim the payment you didn't owe was not made in accordance with the non-existent contract.

What they did was reprehensible in all respects, but more common than just about anyone wants to admit.

Every loan has this same "Moment of Truth" when the final documents are presented. For some loan practitioners, the truth was told before that, but for many others, it wasn't. It has to do with the timeline involved. They make a promise to get you to sign up now, and most people are shopping multiple lenders, so they tell whatever story they think is sexy enough to get you to sign up with them, knowing that most people won't sign up for a backup loan. Thirty or forty-five days from now, when they actually deliver the loan contract, they're the only ones with a loan ready to go, so your choice is limited to sign that paperwork or don't. At sign up, you have the power and they don't, so they say whatever is necessary to get you to sign up with them, because at loan delivery, they have the power and you don't. Once you have committed to that loan provider, you have essentially signed yourself over into their power, and if they don't deliver the loan they quoted to get you to sign up, there are essentially no bad consequences for them. They still get paid when you sign those papers. Over fifty percent of all borrowers literally never notice the differences, and of those who do, eight to nine out of ten will cave in and sign anyway. Upshot: No matter how bad they lied back on day one, there's still a ninety percent plus chance of getting paid. By contrast, if they don't tell a story that's sexy enough to get you to sign up for their loan, there's a zero percent chance of them getting paid. That's why lenders lie, and no legislation and no regulations currently under consideration will change any of this - all it will change is precisely what they have to do in order to get away with it, which is why you should Ask the hard questions of every single prospective loan provider.

You took the time to read the documents carefully, and that's very good. You'd be amazed how many people don't. However, you've got to stick to your guns and refuse to sign. If you had some legal mandate to sign, there would be no point to the right of rescission. What that lawyer was thinking was that if you signed, he got paid, whereas if you didn't sign, he didn't. Disgusting, but probably within whatever code of ethics was theoretically guiding him, as he probably considered the lender to be his client, and not you. I would have told him, "Not going to happen," as I walked out the door. All too often, people want to avoid confrontation and certain personality types can be counted upon to take advantage of it.

That the lender funded the loan the next day is not illegal, as far as I'm aware. Failing to rescind the loan when you rescinded, and to rewind it to the situation beforehand, however, is a hard violation of RESPA, which is federal law, and almost certainly state law and regulations as well. This can lose them their ability to do loans at all in your state, and possibly in any state. This is why nobody actually funds refinances where right of rescission is applicable until right of rescission has expired, because doing that is costly, and what happens if your prior lender refuses to reinstate their loan? After all, they got their money, and having done so, are under no obligation I'm aware of to reinstate the loan contract that has now come to a satisfactory conclusion. I actually don't know what happens in such a situation, but the best guess I can make is that the new lender has to carry the loan on the previous terms and can't charge any fees for the loan, either. Basically, the worst of all possible situations for them.

None of this is going to be easy. It's pretty stressful, and likely to be costly, but the alternative to fighting this battle is worse. Furthermore, if you persevere and do everything right, you could find yourself ending up in a situation that's much better than the one you're in right now, or even the situation that you started in. They don't have a valid lien, the previous lien was paid off, and they have behaved very badly in ways that are potentially legally actionable. Strict liability might apply to their failure to rescind properly when you did rescind in a timely fashion. Of course, they did willfully violate the law in gross violation of due diligence, so strict liability probably isn't necessary to winning such a case. Once again, though, I'm not a lawyer, only a layperson who's learned enough to be dangerous to anyone who pays attention to me instead of a licensed professional. Consult a lawyer licensed in your state for information you can count on.

Caveat Emptor


Poll shows McCain in 5-point lead over Obama

"There is no doubt the campaign to discredit Obama is paying off for McCain right now," pollster John Zogby said. "This is a significant ebb for Obama."

It is just one poll, but the problem for Obama is that every one of McCain's criticisms of him has been substantially true. The problem for Obama is that when you're a major party nominee (or presumptive nominee), everything that you've ever done or said is going to be dug up and scrutinized, and there's plenty of documentable trail on Obama to turn away the centrist voters, who hold the balance of power in any election. When it comes right down to it, the only asset Obama has over John McCain is his emotional appeal. It's hard to keep emotions like that in charge for months in the face of a barrage of facts.

I'm not getting comfortable though. The Democratic convention hasn't happened yet. Hillary could still be the nominee. Unlike the Republicans, whose delegates were all elected based upon a promise to support a given candidate, the Democratic "superdelegates" are allowed to change their mind, and it wouldn't take very many. These are party insiders, one of Hillary's core support groups. The Dems could be using Obama for a stalking horse, while Hillary gets a long respite from opposition scrutiny. It could have even been planned in individual meetings - and nobody except Hillary and each individual superdelegate knows who they are until and unless they do change their mind and vote for her at the convention. That's a conspiracy that can be kept - for a few months anyway, as only two people know about any given superdelegate, and only one for sure.

This boosts Hillary's chance to actually win, as for several months everybody's been focusing on Obama, and it still sets him up as the future face of the Democratic party, giving him automatic frontrunner status when her term is over. I think she's got the brains and confidence to engineer such a thing. I question a lot of things about Madame Hillary, but her intelligence is not among them, and I don't think anyone questions her confidence. The only question is, did she actually do it? We won't know for sure until the convention, and even there, the superdelegates changing their votes could be presented as the result of slipping polls, Obama's miscues, or any one of a number of other things.

On the other hand, if Obama wasn't her running mate in such a scenario, the Democrats might do what forty years of Republican outreach have failed to do: Get more minorities to vote Republican. The Democrats aren't competitive if they don't get 70% of the hispanic vote and 90% of the black vote. This also accomplishes something else: Having he vice-presidential nominee give the candidate a large boost due to their own high profile.

On the other hand, Hillary isn't nearly so bad as Obama as far as her actual positions. She'd appoint the same sort of judges (the Democratic base would require it), but her administration policies and priorities would be more centrist than Obama's. So even if this gets her elected instead of McCain, it's not the immediate disaster an Obama presidency would be. I'd rather have McCain, of course. But Hillary as Democratic nominee would have the effect of limiting the damage.

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Russians dig in as pullback drags on in Georgia

Russian forces on Wednesday built a sentry post just 30 miles from the Georgian capital, appearing to dig in to positions deep inside Georgia despite pledges to pull back to areas mandated by a cease-fire signed by both countries.

When somebody tells me they'll do one thing and does something else, I've got a pretty good idea which of the two they really mean.

A top Russian general, meanwhile, said Russia plans to construct nearly a score of checkpoints to be manned by hundreds of soldiers in the so-called "security zone" around the border with South Ossetia.

and one report from someone claiming to be a Georgian corporal

23 Russian tanks, APCS and heavy guns showed up at the base on Tuesday and demanded to be let in. The Georgians refused and the Russians left after a 30-minute standoff but vowed to return after blowing up facilities in the village of Osiauri, he said.

More of the Face of war:

The Ethnic Toll in Georgia

Both Russia and Georgia have hurled charges of genocide and ethnic cleansing at each other in the aftermath of the five-day war in the Caucasus

experts work on housing for displaced Georgians

They are primarily sheltered in schools, hospitals and previously abandoned buildings. Most come from the Gori area, where the fighting has been the worst, and the Georgian government hopes they will be able to return home once Russian troops leave, Finance Minister Nika Gilauri said.
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149 dead in plane crash at Madrid airport

Spanair Flight JK5022 - bound for the popular Canary Islands off the West African coast during the height of Europe's summer vacation season - sped off the end of the runway, crashed and broke into pieces, reports said.

In other words, pilot error or mechanical failure.

Somebody recently asked me about a deferred payment mortgage for a purchase. The long and the short of the story is that they don't have any cash to put down, and they can't qualify for the payments under any kind of reasonable debt to income ratio.

A couple of years ago, in the era of Make Believe Loans, we could have gotten this person a loan. It wouldn't have been the smartest thing in the world, but we could have done it.

Even then, however we would have to have dealt with calculating debt to income ratio, as well as the fact that purchase money loans evaluate the property on a lower of cost or market basis, where the appraisal is the "market" and the official purchase price is "cost." Since it's the lesser of the two values that is used, there is never equity at purchase in excess of whatever down payment you make, at least as far as the lender is concerned.

A paper fixed rate loans use the fixed rate of the loan for calculating front end ratio. They are permitted to use a higher rate than actual, but not a lower one. If your rate is 6%, and they use 6.25% because the rate isn't actually locked on a $300,000 thirty year fixed rate loan, the number they will use is $1847.16. This is not an arbitrary number; it's the most important measurement of whether or not you can afford the loan. The front end ratio, which is the loan payment itself, is not generally a deal breaker if it's too high, but the back end ratio, which is the loan combined with taxes, insurance, homeowner's association, and all your other monthly debt service, is. Those other numbers are all fixed based upon your situation. You owe what you owe, property taxes are what they are, and you only make what you make - or actually, as far as the lender is concerned you make what you can prove you make. I've spoken against overstating your income from the very first on this site.

When you move to A paper ARMs, the allowable back debt to income ratio actually goes down, usually to 38% from 45%. Not only that, but the rate used to compute the payments is usually much higher than actual. The calculations require the use of, not the initial rate on the note, but the final, fully indexed rate on the note. They use current rate for the underlying index the ARM is based upon, plus the rate margin. Say the initial loan rate is 5.25% but the underlying index is at 4.75% plus a margin of 2.25%, they will use 7% for the purposes of determining whether or not you actually qualify for the loan. In the $300,000 example above, this means they'll use $1995.91, even though the actual rate and payment is lower - and due to lower maximum debt to income ratio, the ceiling on what you can afford at a given income level will be lower. Depending upon the lender, they may even add a bit of a margin to that qualifying rate. This makes it significantly harder to qualify for an A paper hybrid ARM than a fixed rate loan, even though the rates and payments are lower, and is certainly one reason why there aren't more of these loans out there. Nonetheless, this procedure they use for qualification does mean that someone who manages to qualify should be able to afford whatever the payment eventually adjusts to.

One of the reasons subprime loans got so popular was that they stopped using this method of determining whether an applicant qualified for the loan. The subprime lenders started qualifying applicants based strictly upon the minimum initial payment, despite the fact that they knew good and well that the payment was going to adjust upwards at a known time. Even if the initial payment was "interest only" or negative amortization. They just assumed that the people would get raises, be able to refinance with increased equity, or just be able to lift themselves up by their own bootstraps, or something else equally hope based. Three strong verses of "Kumbaya" would have been about as intelligent, but it worked so long as Wile E. Coyote didn't look down. It shouldn't be a surprise to anyone that this is one of the reasons why subprime crashed so hard, especially in conjunction with stated income loans. Because this made it absurdly easy to qualify for a loan, especially a larger loan than people could really afford, subprime loans were ridiculously popular for a while, even among people who should have been able to qualify for A paper had they limited their budget to what they could afford. When the adjustments hit, it was predictable as gravity that those folks who qualified subprime couldn't make their payments. When the market values stopped rising so quickly that they supported serial refinancing, it didn't take very long for large scale problems to emerge. In the overall scheme of things, subprime loan qualification was good for real estate agents who wanted easy commission checks, irresponsible loan officers, and people with the sense to cash out of the market while things were still going crazy. For the people who applied for subprime loans, not so much.

You should want to qualify with the toughest standards you can meet, preferably A paper full documentation, and even the A paper ARM standards if you can, but this concept was a little bit difficult to get across to the people who already had their hearts set on a property that was way too expensive for them, especially when everyone else is encouraging the speculative atmosphere. It got to the point where newspapers were running articles on "What's a fair margin over index for negative amortization loans," when the correct response would have been, "RUN AWAY."

The whole situation is enough to make you understand exactly how many people outsmarted themselves in pretty much the same wise as the people pictured in this clip:

Unlike the fictional characters portrayed, however, the consequences for borrowers who get in too deep does not end when the director yells, "Cut!" You might want to bear this in mind when figuring out exactly how much loan you can really qualify for. Even the subprime lenders who survived have now figured it out, proving that even the silliest English Knight ("Ca-niggit") can learn when the pain gets bad enough.

Caveat Emptor

Article UPDATED here

Carnival of Personal Finance

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Kathleen Parker illustrates in three quick emails the responses of George W. Bush, Barack Obama, and John McCain to Russia's Georgian aggression.

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Well, duh: Bush accuses Russia of 'bullying and intimidation'

President Bush on Friday accused Russia of "bullying and intimidation" in its harsh military treatment of Georgia, saying the people in the former Soviet republic have chosen freedom and "we will not cast them aside."

Bush ratcheted up his rhetoric against Moscow as Secretary of State Condoleezza Rice was in Tbilisi, Georgia to pursue a diplomatic solution to the week-old crisis. Standing alongside Rice, pro-Western President Mikhail Saakashvili said he had signed a cease-fire agreement with Russia that protects Georgia's interests despite concessions to Moscow.

The problem is that President Bush appears to be just saying that, as opposed to doing anything about it. Of course, if Russia in committed to making contests into military ones, that trumps all other methods of dealing with a problem, at least in the short term. And President Bush is more than a little circumscribed by the current political situation.

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Given the current situation in Georgia, is there much doubt what they're really saying?
Russia: Poland risks attack because of US missiles

A top Russian general said Friday that Poland's agreement to accept a U.S. missile interceptor base exposes the ex-communist nation to attack, possibly by nuclear weapons, the Interfax news agency reported.

The system scheduled for installation has no offensive capability worth mentioning. Yeah, it would be a bummer for those involved if a fragment of a missile came down on an enemy tank, but that would be a freak coincidence and it's not designed to damage anything but other missiles. All it really does is defend against incoming missile assaults, and if a certain unnamed country east of Poland has no intention of bombarding Poland with missiles, it makes no real difference to the situation. Worth making a fuss over? Not in the least, in that situation.

But a certain country to the east of Poland is making a big fuss. Appears to me like Russia threatened Poland with nukes while preserving a thin veneer of deniability of having made such a threat.

"Poland, by deploying (the system) is exposing itself to a strike - 100 percent," Nogovitsyn, the deputy chief of staff, was quoted as saying.

100 percent? Sounds like they know where such a strike would be coming from. Estonia? Doubt it. Belarus? Almost certainly not. Hungary? I don't think so. What is the one nation with nuclear weapons that has invaded Poland multiple times in the last century (Minimum of twice, in 1920 and 1939, and could be five or more times, depending upon how you count)? Hint: It's not Pakistan. And no, I'm not talking about the tourists in Krakow and Warsaw, either. Military force invading upon explicit instructions of their government. Do you think the government of such a country might have a vested military interest in Poland being unable to defend itself against atomic aggression? And why might they consider themselves to have such a vested interest? If they had no interest in invading Poland - again - there's no reason to get antsy about it and make threats.

Here's another hint: What still extant countries participated in the most brazen land grab of the last five hundred years, one bold enough to make our own western settlers blush with shame (as well as a major reason why the US has the Polish descended population it does)? Which still extant country considers Poland part of its Empire? I'll even make it easy for you: Run "Poland Partition" through a search engine of your choice. How about "Solidarity Trade Union" Ringing any bells yet?

At a news conference earlier Friday, Nogovitsyn had reiterated Russia's frequently stated warning that placing missile-defense elements in Poland and the Czech Republic would bring an unspecified military response. But his subsequent reported statement substantially stepped up a war of words.

I am Russia, hear me roar!

But what happens if Poland gives them what they want today? Do they have to listen closer, or do they have more independence of action with a missile defense? I submit that it's the latter - which is why Russia doesn't want them to have it.

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A credible report of Russia conducting ethnic cleansing

With the current popularity of pursuing a "green" lifestyle and some sustainability (garden plot, edible landscaping, micro-orchard, etc.) in one's yard area, I value your input about what to look for in an older subdivision with larger lots that aren't "vampire properties." And how do you factor in local ordinances? Thanks!

First off, I want to say that it's not my place to pass judgment on anyone's housing preferences. This person wants more green, so I'm going to help them with that.

If you're really looking to be green, there are a lot of reasons not to buy a single family detached home. In heating and cooling, materials, and most especially land use, single family detached homes are about as un-green as it comes. Talk to the sustained use experts, and they'll tell you that single family detached housing is horribly wasteful of everything involved. The "greenest" housing is high rise condominiums and apartment buildings. Not what everyone wants to hear, but nonetheless the truth.

With that said, there are degrees of "green". Small sized plots are not agriculturally efficient - that's one reason why Zimbabwe (to name the worst example) has gone from breadbasket to starving in a few years time - they broke the big farms up into little farms supporting one subsistence level family each. So you're not going to produce enough to offset what the land could do as part of a commercial farm or large public park, but you can do fairly well if you check with your local greenery experts. Locally, Kate Sessions (our most famous landscaper) was known for gardens that were both beautiful and water efficient - to the point where the City of San Diego doesn't water large portions of Balboa Park at all. Pretty much every greenhouse locally has someone whose advice to make the landscaping efficient is worthwhile. Even townhomes can be worthwhile - I know folks with dwarf fruit trees in the back yards of their townhomes, and if a homeowner's association was to make an effort, most of them would make far more more difference than a single plot owner - because while it is a common interest development, when you put them all together, you usually have several times the land available of most single family detached urban dwellings. Trees provide shade in summer and keep it cool - and they help break the wind and lower heating bills in winter. Obviously, check with someone local to you for specific recommendations because I'm pretty sure orange and lemon trees don't do so hot in Minnesota winters. Grass is nice, and good for resale, but it's a big user of water - a no-no for Green living in most of the west. It wouldn't be such a big deal to water grass with 'gray' (used water, no longer potable) if lawns weren't so notoriously un-"green".

For heating and cooling, double or triple paned windows and good, tight weatherstripping are pretty much mandatory for greens. Newer housing has this sort of thing already installed, and lots of older ones homes do, as well. Given the cost, it probably is not worth while to replace existing windows with modern ones for that reason alone, but that doesn't stop a lot of people. I'd think wood floors - replaceable, polishable, durable - would be superior to anything else, but I can't cite chapter and verse. I know a lot of beautiful hardwood floors that are the better part of a century old - while even travertine starts looking dingy in less time than that. When wood starts looking old, it can be re-polished to its original shine more easily than anything else I'm aware of. Finally, wood is a much more renewable resource. Trees grow back. Quarries do not. Petrochemicals do not.

Good insulation is a feature of eco-friendly housing as well, but be careful: Too much can actually be a health hazard, as it can cause Radon gas to build up to levels that are illegal in uranium mines.

Modern air conditioning units work without CFCs. R410a ("Puron") is what home systems are in the process of converting to, as CFCs and HCFCs are being phased out. I don't have any first hand experience with this, but if you're replacing your system, it appears to be worthwhile to consider replacing with a high efficiency modern system. The difference in price is smallish, and the difference on your monthly bill significant. The upshot is that you'll pay for replacing your prior system with a high efficiency system a lot more quickly than a low. I'm also told that simply running the ductwork underground for a certain distance can negate the need for heating and air conditioning altogether - all you need is a good fan to pull the air through. Be careful that the static ground temperature in your area will support this first - check with a local expert. Needless to say, that last suggestion about burying roughly 100 feet of ductwork isn't really an option for the owners of anything but single family detached housing, even though it needn't be in a straight line..

The square-cube law is always in effect. Heat and cold leak in and out via surface area, while you're heating or cooling cubic volume. The smaller the surface area, as a proportion, the longer it takes for heat and cooling to leak out. A featureless cube (or better yet, sphere) is more efficient than a rambling single story ranch house. Nonetheless, it's more efficient to heat a small structure than a large one, and body heat from the inhabitants helps more in winter. A 1200 square foot dwelling is more "green" than a 3000 square foot dwelling for the same family. Is that going to stop me from showing 3000 square foot dwellings to those who want them? Absolutely not. Once again, this is "other factors being equal."

If you really want to go green, especially in the west, you're going to get into recycling the water you use. Laundry water can be used for a lot of plants, as can bath water. The ultimate instances of this are pretty disgusting if you think about them, but people do go a lot further than this, and every drop of water on this planet has gone through such a cycle multiple times. It's all pretty much dependent upon how far you want to go on your own hook. My main objection to the City of San Diego's water recycling plan was that it wasn't good enough to get out all contaminants, and people weren't going to get their own discharges back, so they could drop stuff into the drain like old engine oil, and be confident it wasn't coming back to their tap.

Green construction is no better and no worse, as far as intrinsic durability and aesthetics go, than non-green construction. It can be more expensive (How many hardwood floors have been laid down these last ten years?), but quite often, you can actually save yourself money in the end if you're willing to make the up-front investment. How far you want to go is a function of your preferences, pocketbook, and your area of the country.

Caveat Emptor

Article UPDATED here

A new entry in my neighborhoods series is up: Neighborhoods of La Mesa: Northmont

I have also just accepted an invitation to write for a new blog sponsored by a fairly well-known corporation on consumer mortgage issues. I don't want to give any details lest I upset some applecart inadvertently, but they should come out within a couple of weeks.

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Chasing the Mythical 'Obamacan' Masses

In fact, John McCain's share of the Democratic vote has typically--and surprisingly--been larger than Obama's share of the Republican vote.
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China Makes Policing an Olympic Event

Uniformed guards are on major overpasses and bridges, surface-to-air missile batteries are reported to have been set up beside key Olympic facilities, and X-ray machines and metal detectors have been placed in the city's subway system. Vehicles entering the outskirts of Beijing must go through security checks--resulting in long delays. The post office has temporarily banned the sending of all liquids and some electronics.

Meanwhile

British Journalist Roughed Up & Arrested For Covering "Free Tibet" Protest In Beijing

Show of hands: Is anyone actually surprised by this? Anyone? Bueller?

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Silly Senator, Ethanol is for food

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Putin sticks out tongue, taunts world, says, "make me!"

Russia: 'Forget' Georgian territorial integrit

Russia's foreign minister declared Thursday that the world "can forget about" Georgia's territorial integrity, and American and Georgian officials said Russia appeared to be targeting military infrastructure - including radars and patrol boats at a Black Sea naval base and oil hub.

Russia is playing this game for keeps. Penalties and sanctions from trade organizations and all that presuppose that the merchants have some power in the political set-up. In this case, not really. Putin has spent the last eight years silencing dissent in Russia's entrepreneurial class, and making sure his foot is securely upon their neck. Net result: the people that we're counting on to help keep Putin in line have no ability to do so, and if they don't want to end up like others of their class, no willingness to try.

Another APTN camera crew saw Russian soldiers and military vehicles parked Thursday inside the Georgian government's elegant, heavily-gated residence in the western town of Zugdidi. Some of the soldiers wore blue peacekeeping helmets, others wore green camouflage helmets, all were heavily armed. The scene underlined how closely the soldiers Russia calls peacekeepers are allied with its military.

This is no surprise. If we had US Peacekeepers in a country we invaded, we'd expect them to cooperate with the rest of our military. The incredible thing is that Russian troops, with Russia's activities as they were and interests in re-acquiring Georgia, were ever named and accepted as peacekeepers in the first place.

The Russian General Prosecutor's office on Thursday said it has formally opened a genocide probe into Georgian treatment of South Ossetians. For its part, Georgia this week filed a suit against Russia in the International Court of Justice, alleging murder, rape and mass expulsions in both provinces.

Posturing for the media. For what it's worth, there's probably some merit in the Russian charges - which wil be the figleaf the rest of the world pulls down to cover the far worse Russian transgressions, as well as the provocations that led to Georgia choosing a military option in the first place. Still, it was criminally stupid of the Georgian president to attack with overwhelming force poised close by, and incredibly incompetent of our own State department not to make certain the Georgians had timely warning, as well as a frank assessment of the US power to intervene in case of military confrontation - which is to say "none."

The good news just keeps coming:
Pentagon puts hold on USAF cyber effort

The Pentagon this week delayed and may kill the Air Force's nascent Cyberspace Command, according to a memo obtained by The Associated Press. This comes as Russia used a major computer network attack to begin its assault on Georgia.

How stupid do you have to be to de-emphasize a command that is designed to prevent the enemy from telling your computers to bomb your own troops - and may be able to tell the other side to bomb their own troops?

There are about 3 million attempted penetrations of Defense Department networks every day, according to the Air Force.

3 million reasons per day that this is important, and they still did it? Someone's brain has completely fossilized.

A senior military commander told the AP, however, that the mission to defend U.S. military networks is better vested in U.S. Strategic Command, which has the military responsibility for cyberspace across all services and commands.

Yes, but it's a combined arm, which means that the cyber warriors will tend to get short shrift as opposed to their own command that concentrates on their own operations.

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Airlines association sues FAA on slots auction

Sounds smart - until you have 800 or 1000 bodies on the ground, and an airport that's closed for hours, and you're trying to explain to the aggrieved relatives exactly why those planes came together. Nor is two airplanes the limit for crashes taking place on the airport tarmac. Scenario: 747 landing, bounces off MD-11 on the runway and into a line of planes taxiing out for departure - or into the terminal area.

The FAA is trying to relieve congestion of the "one thing goes wrong in a minor way and you've got two jetliners full of passengers in imminent danger of death" sort, and the airlines are so wedded to current practice that they're taking to the courts to prevent it.

Question: How many of the top executives at these airlines have taken the time to understand what controllers go through? That's a big enough problem with the FAA people. I don't believe I ever saw, or heard of, industry executives in the "C" class (CEO, CFO, COO) so much as taking a tour of an air traffic facility. Sat down and watched a controller work peak traffic? Nope. They seem to regard the FAA's air traffic division as a magic wand that's somehow to supposed to sort out everything they want to do, and miraculously, without delays. And that is what the controllers are being paid for. Nonetheless, there are limits, imposed by such thing as runway capacity, airspace limits, and the fact that airplanes have to be positively separated 100% of the time - 99.9999% is not good enough, as there would be multiple midairs per day if that were the standard.

Maybe the airlines are counting on being able to shove legal responsibility as well as public blame off onto the FAA when (not if) a controller makes a critical error that causes a couple of planes to meet going a couple hundred miles per hour. I heartily advise them to re-think this attitude. What they're doing is the rough equivalent of pulling out ten feet in front of a car going 60 mph while making sure the next lane over is full. Yeah, the FAA has problems. That's no excuse for putting them into a situation where the system is going to fail disastrously with one mistaek - and five hundred people just died because of something equivalent to a typo.

Here's a snapshot of live traffic (delayed 5 minutes)

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Remains of cemetery found in Sahara

The human remains dated from two distinct populations that lived there during wet times, with a dry period in between.

The one constant about climate is change.


Rock. Earth. Gravity.

Russian convoy heads into Georgia, violating truce

A Russian military convoy thrust deep into Georgia on Wednesday and Georgian officials said Russian troops bombed and looted the crossroads city of Gori, violating a freshly brokered truce intended to end the conflict

The Georgians are out of Abkhazia and South Ossetia entirely. There is no justification for this.

"The border has been along this river for 1,000 years," separatist official Ruslan Kishmaria told AP on Wednesday. He said Georgia would have to accept the new border and taunted the departed Georgian forces by saying they had received "American training in running away."

Yes, and how long will it be before they find out they've made the same sort of bargain the Iranians did in 1978, the Germans in 1933, and the Russians in 1917? Or, to quote from popular culture: "I am altering the terms of our agreement. Pray I don't alter it any further."

By the way, Georgia has about 26,000 men total in their armed services. That's maybe one combat division and the support troops. By comparison, the map StratFor had up Monday showed six Russian combat divisions (Mechanized) plus thee armored combat brigades and two battalions of combat engineers in or very close to Georgia. That's more combat forces than the US-led Coalition has in Iraq. You don't have that kind of force in the area and ready to go by accident. This was planned, this was deliberate, and the Russian troops are doing precisely what they have been ordered to do.

Russia's deputy chief of General Staff Col.-Gen. Anatoly Nogovitsyn denied any tanks were in Gori. He said Russians went into the city to try to implement the truce with local Georgian officials but could not find any.

An APTN television crew in Gori saw some Russian armored vehicles Wednesday morning near a military base there. Puffs of smoke in the air indicated some military action.

Stonewall, denial, keep doing what you want while the rest of the world denies the facts, because doing so is immediately convenient. Same dance, different floor.

Georgia insisted its troops were driven from Abkhazia by Russian forces. At first, Russia said separatists - not Russian forces - had done the job. But the claim rang hollow - an AP reporter saw 135 Russian military vehicles heading toward the gorge Tuesday and Russia is the military patron for the separatists.

Nogovitsyn said Wednesday that Russian peacekeepers had disarmed Georgian troops in Kodori - the very peacekeepers Georgia wants withdrawn. Still, the effect was clear. Abkhazia was out of Georgian hands and it would take more than an EU peace plan to get it back in.

Why? Because Putin wants the Soviet Empire back, and Georgia controls the only oil pipelines that break the Russian monopoly on oil in Europe. With that pipeline as well as the Russian ones firmly in possession, Europe can either 1) dance to Putin's tune, or 2) Starve and freeze. I don't remember where I saw it, but somebody this morning said, "I have looked into (Putin's) soul, and seen three letters: KGB"

Georgia sits on a strategic oil pipeline carrying Caspian crude to Western markets and bypassing Russia. The British oil company BP shut down one of three Georgian pipelines, saying it was a precaution.

Try running Ploesti oil fields through a search engine if you want a historical parallel.

Aargghhh! tells us why the breakaway provinces are important to Georgia

Wizbang on why Georgia and similar nations are important to the US and the world.

Some history: Putin the terrible

Even if this invasion leaves a nominally independent Georgia, it will be a Russian puppet in at least this one respect, and probably in others. This is a wake-up call to the world, but we're handling it pretty much like we did this.


On Scene: A Cry for Unity in Georgia

"We are all Georgians today," U.S. presidential candidate John McCain said Tuesday. But it was eastern European leaders who showed up in force in Georgia on a sultry evening to reassure the huge crowd of Georgians. No fewer than six heads of state flew into Tbilisi to pay their respects and show their solidarity with this small nation of 4.5 million people. They included France's Nicolas Sarkozy and the Presidents of five other regional neighbors, including Poland and Ukraine. Sarkozy stayed behind closed doors, trying to hammer out a ceasefire agreement, but the others unabashedly threw in their hat with the Georgian side.

That and a dollar will get you a cup of coffee. When the other side is willing to use violence and you are not, you are at their mercy. I don't think Putin and the Russian nationalists will have any, in this case.

Time Magazine has been all over this, to its credit:
The Russian Empire Strikes Back

Failing the Georgia Test

the incursion of Russian troops beyond the secessionist province of South Ossetia represents a direct challenge by Moscow to the U.S., the European Union and NATO, reviving the old confrontation between the former Cold War adversaries.

The United States Shares the Blame for the Russia-Georgia Crisis

Washington established two precedents: use of force without approval of the United Nations Security Council and the division of a sovereign nation without U.N. consent. Both precedents emerged out of Kosovo's quest for independence from Serbia, which led in 1999 to U.S.-directed NATO airstrikes against Serbia to drive Serbian military and police forces out of its Kosovo province. The Clinton administration and NATO conducted the strikes--both in Kosovo and in Serbia proper, where the attacks targeted not only security units but also civilian infrastructure, like power stations--over Russia's strong opposition in the Security Council. Russia today is repeating NATO's 1999 justification of its action in arguing that Georgia conducted ethnic cleansing and genocide in South Ossetia and that Moscow was obliged to respond because of its role as a peacekeeper.

I'm not so certain of his second point - that Bush administration officials support for Georgia was a cause. First, there is a real need to be willing to support allies in ways that actually cost something. Otherwise, all you have is a friendship of the moment. Second - and this is critical - Georgia did not attack Russia. They only attempted to regain their own breakaway provinces. The Russians had been doing everything possible to lay the groundwork for annexation since Putin's accession, but South Ossetia and Abkhazia were part of Georgia, according to all the international accords.

John McCain saw the reality immediately, to his resounding credit, while his opposition once again betrayed his authoritarian bias

On Friday, Russian tanks and troops moved through the Roki Tunnel, across an internationally-recognized border, and into the Georgian province of South Ossetia. Two years ago, I traveled to South Ossetia, my friends, and we went through this barricade, and as soon as we got into this place, which the Russians are maintaining hundreds and now thousands of troops, there's this huge billboard and it said, 'Vladimir Putin, Our President.' Have no doubt about Russian ambitions in this area.

The Russian government stated it was acting only to protect Ossetians, and yet, on Saturday, its bombing campaign encompassed the whole of Georgia. Hundreds of innocent civilians have been wounded and killed -- possibly thousands. Military bases, apartment buildings, and other infrastructure all came under Russian fire. And the Russian Black Sea Fleet began concentrating off of the Georgian coast.

Russian hackers continue attacks on Georgian sites

Attacks by Russian hackers against Georgian Web sites, including one hosted in the United States, continued Tuesday even as Russian President Dmitri Medvedev ordered a halt to hostilities against Georgia.

How long does it take to stop a computer-based attack? The answer may be up there in the range of whole entire seconds - mostly from the need to communicate with the person running it and enter the commands necessary.

Richard Fernandez on the reports that the computer attacks preceded even the Georgian assault.

Is Ukraine next?

The U.S. has long seen Georgia and Ukraine as counterweights to Russia's influence in the region. Opposition leaders in the two countries came to power after U.S.-backed popular protests in 2003 and 2004. Their ascension advanced an American strategy of expanding NATO to include both countries and securing energy routes from the Caspian Sea that bypass Russia. The BP Plc-led Baku-Tbilisi-Ceyhan oil pipeline to Turkey runs through Georgia.

This is nothing less than the opening shots of a new campaign for world domination on the part of Putin. His actions are too consistently aimed in that direction to deny it.

American Troops Help Defend Georgia (127 trainers)

Israel understands what's happening: Israeli Military Sales To Georgia Continue

Victor Davis Hanson says it best: Moscow's Sinister Brilliance

There will be no Russian demonstrations about an "illegal war," much less nonsense about "blood for oil," but instead rejoicing at the payback of an uppity former province that felt its Western credentials somehow trumped Russian tanks.

and

Indeed, tired of European lectures, the Russians are now telling the world that soft power is, well, soft. Moscow doesn't give a damn about the United Nations, the European Union, the World Court at the Hague, or any finger-pointing moralist from Geneva or London. Did anyone in Paris miss any sleep over the rubble of Grozny

and

The Russians have sized up the moral bankruptcy of the Western Left. They know that half-a-million Europeans would turn out to damn their patron the United States for removing a dictator and fostering democracy, but not more than a half-dozen would do the same to criticize their long-time enemy from bombing a constitutional state.

and

From what the Russians learned of the Western reaction to Iraq, they expect their best apologists will be American politicians, pundits, professors, and essayists -- and once more they will not be disappointed. We are a culture, after all, that after damning Iraqi democracy as too violent, broke, and disorganized, is now damning Iraqi democracy as too conniving, rich, and self-interested -- the only common denominator being whatever we do, and whomever we help, cannot be good.

Big Lizards has some good suggestions as to a future plan of action. Nothing in the way of immediate military action, but that's not realistically on the table for logistical reasons.

Q and Oalso speaks sanity.

The pause that deposes

Foreign Minister Sergey Lavrov refused to negotiate with Georgia's elected government, saying publicly that Mikheil Saakashvili "has to go", while President Dmitri Medvedev ordered his troops to "crush" any remaining Georgian resistance.

If that sounds like peace, it's the peace of the graveyard:

Does anyone else remember that the word for "peace" in Russian is the same as the word for "world"? (Mir)

The short answer is because they will lose the business.

But they still want it. It's not like they're paid by the hour. If they don't take a loan all the way to funding and recording, they don't paid. If they actually tell you the whole truth - that there's no way in the universe that the loan they originally told you about isn't going to happen - then what do you think most people are going to do? That's right - forget the whole thing or go looking for someone else to do that loan.

So what they do is pretend everything is going along smoothly. They pretend this right up until the moment they hand you the final loan paperwork. In the meantime, ignorance is bliss, as in your ignorance of the truth means that they don't have to worry about you taking the loan elsewhere. Because they're still pretending they can deliver the loan that you thought you were getting, most people will have no desire to shop other loans. Signing up for a back up loan is probably the best performing and cheapest policy of insurance you will ever get, but most people won't do it.

With this in mind, many loan providers have stopped limiting themselves to loans that can actually be delivered at any price. During my short period at The Company Which Shall Remain Nameless, there was quite a bit of discussion about how low of a rate companies could get away with advertising - including things like putting up illegal advertisements when state regulators (Monday through Friday, 9 to 5) wouldn't be on the job, and replacing it with legal ads before they returned on Monday. In the meantime, of course, people would be calling the office looking for that loan that didn't exist, and they would be signing these people up. The laws about rate advertisements are remarkably weak and trivial to violate in spirit, but that's not enough for a lot of companies. You want an eye-opener about how far it's legal to lowball a mortgage quote, click that link.

So they talk about a thirty year fixed rate loan at 5% to get you to sign up. Maybe they even put it on an MLDS (California) or Good Faith Estimate (the other 49 states), with a so-called Truth In Lending Advisory. None of it means anything if the lender doesn't want it to. Nor will the proposed regulatory amendments stop this practice. They'll just issue amended paperwork later, at final signing.

What happens when you get to final signing? They've got some other loan ready to go. Nor do they bring the differences to your attention. If you don't notice, they've got a funded loan they just got paid for without any unpleasantness. Most people don't know what to look for at loan closing to make certain what was delivered was what they originally talked about. If you notice later, it's almost always too late to change your mind. If you do notice at time of signing, they can point out that this loan is ready to go - all you have to do is sign to be done with it. If you don't sign, you're back to square one, with many possible negative consequences for not signing. In the case of a purchase, with a deposit at stake, I'll bet $100 sight unseen that the people will sign whatever loan they're presented in order to not lose that house and not lose the deposit. Even in the case of a refinance, too many people have already spent the money for this month's payment. You never really skip a payment, but that doesn't stop many lenders from promising that you will. It does, after all, increase the probability they'll be paid for a loan.

Lenders deal with this elementary fact of life every day. They talk about whatever they talk about to get you to sign up first, then thirty days down the line, it's perfectly legal for them to deliver something else. A good loan officer doesn't do this. I'm not going to say I've never had a loan go south on me, but I always tell people why that loan is not deliverable despite what I previously thought, and tell them about the new loan within no more than seven days of initial sign-up. In all but the craziest refinance booms, that's plenty of time to get the loan submitted for lender feedback and a loan commitment from the underwriter. I don't like getting anything but routine "prior to funding" conditions on my loan commitments, but even if I do get such a condition, I should know whether it can be met immediately (It can, in the vast majority of cases). Lenders almost always know when you initially sign up what loan you will really qualify for, and what it's really going to cost, but most people won't ask the questions necessary to nail down a mortgage quote to something real, and the lender certainly won't volunteer the information, as their probability of getting paid depends upon getting people to sign up. In turn, getting people to sign up hinges upon them pretending to have a better loan than the other lenders pretend they have. The similarities to a singles bar (or internet dating) are pretty close. Most folks are telling the story that they think will get them what they want, regardless of whether it has any connection to reality or not. You want to be able to separate out the real from the unreal, because no matter how attractive the unreal stuff seems, you're not going to be getting it.

Caveat Emptor

(This is a companion article to What Sellers Need: What Buyers Should Want to Supply)

Quite often, I hear people talking about the real estate market as if it's all some amorphous blob, and buyers and sellers are no more different than they are in the stock or bond market, or for that matter, people using the bank to make deposits or withdrawals.

I cannot agree with this concept. Real Estate is not liquid, and real estate is not commoditized, and in the absence of some future world government building precisely one identical housing unit with precisely the same environment for everybody, I daresay it never will be. Since the chance of the rulers of that government limiting themselves and their cronies to the same housing everyone else has are nil, you can take it from there.

What do buyers need? They have the cash the seller (that would be you) wants, or the ability to get it via a loan, which comes to the sellers as cash - providing they can actually qualify, hence the preceding paragraph. What they need in exchange for that cash is the the assurance they will be getting a clear title, unencumbered by outside interests who may come after them later. They also need an assurance that the building - which is what 99.99% of all buyers are really interested in - is going to continue standing in good, inhabitable condition for the forseeable future. If there is a loan involved, the lender will want reasonable assurance that they can recover their investment if something goes wrong with the loan. Just as seller's issues become buyer's issues, so do buyer's issues become seller's issues.

This makes delivering clean title imperative. If there's a possibility buyers are going to put every penny they saved for three years into purchasing a property, together with putting themselves into debt for thirty years, and end up not owning that piece of property after all, it shouldn't be difficult to figure out that the property is worth much less to that buyer - or any other prospective buyer. There is a profitable niche in clearing title on real estate, but you've got to really know what you're doing, and you've got to be prepared to lose everything invested in a given property. There's a reason the standard California purchase contract requires the seller to purchase the buyer a specific very broad policy of title insurance, and why it allows and requires negotiation as to which title insurance company issues that policy. I want a good solid company that only insures good risks, because I want them to be around and able to pay the claim if one happens forty years down the line, as opposed to Fly Tonight Title that disappears as soon as it has the premium payment. If a good reputable company won't insure title, there is a reason, and title insurance that isn't there and solvent years later is useless. Actually, it's worse than useless because without that title policy that turned out to be useless, nobody in their right mind would have paid that anywhere near that price for that property. So yes, a good policy of title insurance costs money. However, without that title policy the property is worth a fraction of what you might get for it with that title policy - and this fraction is well under 50%. Paying for a title policy is part of the cost of getting as much cash as possible for the property. Examined in terms of return on investment, there's nothing that even vaguely approaches it.

As far as the building's structural integrity, inspections cost money: hundreds of dollars. It's not cost-effective for buyers to perform inspections on every property they want to make an offer on, and the owners - or their tenants - might have a little something to say about an inspector invading their personal spaces for three hours or so. But it is necessary that the inspector have legal responsibility to the buyer, and that's the reason why sellers are wasting their time getting an inspection. Yeah, it can help you fix problems before you put the property on the market. But no competently advised prospective buyer is going to accept such an inspection, because if there's something wrong or something missing, that buyer has no recourse to sue an inspector that was, after all, working for the seller. But if their inspection reveals problems, the buyer is going to want the ability to negotiate repairs, compensation, or to get out of the contract entirely, hence, the inspection contingency. This is one reason why sellers misrepresenting the condition of their property are not only fooling themselves, but costing themselves money as well. Furthermore, the general inspector can recommend further inspections if there is something beyond their competence. Until somebody pays you the necessary cash to purchase the property, the problems that may exist aren't buyer problems - they're seller problems. Buyers can always (at least until the inspection contingency expires) choose to instead walk away and make an offer on the identical floor plan down the street without these issues. It's up to the seller and their agent to motivate them not to do that. Consider that if this prospective buyer's inspector found the problem, it's likely that the next prospective buyer's inspector will, as well. Actually, a good
buyer's agent will probably spot things before it gets to the point of an offer. Until you have that escrow check in your hand for the equity, these problems are the seller's problems. Remember, that prospective buyer can simply decide they don't want the property. Until the property is successfully exchanged for cash, all of those problems are part of owning that property, and you need to find a buyer who's willing to deal with these issues in order to sell. Delivering what buyers need, a solid property without objectionable issues, is a seller concern. Good agents will help, but bottom line, it's the seller's profit or loss.

With the exception of all cash sales, a very small proportion of real estate sales, there is going to be a lender involved, and when there's a lender, the issues that buyers have with lenders become seller issues as well. It may be precisely the opposite of the inspection situation: It's always the seller's choice as to whether to work with a given prospective buyer, and buyer issues in this regard are subject to finding a seller willing to deal with them. Nonetheless, the vast majority of all buyers don't have the cash to buy your property without a loan, and if you want to restrict yourself to prospective buyers willing and able to offer all cash for your property, that's your prerogative. Doing that, however, restricts your pool of potential buyers far more than anything else. Drastically lessened number of buyers who could choose to offer all cash drastically reduces the sales price. Even those buyers who have the ability to pay all cash often do not want to, for various reasons, and this unwillingness on your part means that they will be willing to offer less for your property.

Every loan does have the real possibility of being turned down. I can do everything from verify all the buyer's information to checking the prospective loan against lender guidelines for issues, but if that underwriter turns down the loan, or (more commonly) puts conditions on an approval that the prospective borrower can't meet, that's pretty much the end of the loan. There is one vote that counts, and it belongs to that underwriter. The loan officer can reason, wheedle, and appeal, but the bottom line is that if the underwriter can't be swayed, the loan is dead. They don't reject loans very often when a loan officer has done the work beforehand, but it does happen, and is the reason that nobody except a loan underwriter for the lender you're submitting it to can guarantee the loan will be approved. Since no loan gets to the underwriter without a fully negotiated purchase contract and no borrower ever communicates with an underwriter directly, there is always a very real possibility that the loan the borrower is counting on will be turned down. For most loans, there's other places that will do the loan, albeit upon slightly different terms. Occasionally, though, there are loans where it's this lender or nobody, as nobody else has loan guidelines that will allow that loan to be funded. These two terms add up to the necessity for a loan contingency. If the buyer can't find someone to loan them money on terms that satisfy this purchase contract, they don't want to lose their deposit, and definitely don't want to be obligated to purchase the property. If you, as a seller, do not want to allow a loan contingency, that is certainly something you can choose to do - but it's going to cost you in terms of the proffered sales price, probably a lot more than the amount of any deposit. If a seller doesn't have good evidence prospective buyers can qualify for the necessary loan, I don't know any reason why they would agree to work with those buyers at all. If they do have such evidence, I don't know of any reason why they would want to focus on the deposit instead of the purchase price. The deposit is iffy at best and takes paying legal costs to get, not to mention it's usually not going to pay for the costs of the escrow period. The purchase price, once you get it, makes those costs stop, and it's a lot more probable than getting that deposit.

What the lender is looking for (absent evidence of impending fraud) is two things: Evidence of borrower ability to repay the loan, and evidence that they'll get their investment back if the borrower defaults. It is to this end that lenders require an appraisal from a licensed appraiser who has some demonstrated ability to (insurance or a bond) to repay them if the property does not, in fact, possess that value. Now, here's the kicker: If the appraisal is too low, you can pretty much bet that any lender on earth will reject that loan. There really isn't a need for a separate appraisal contingency, and if I and my buyer clients don't see the value in the property, we're not making an offer in the first place. Even in those rare instances of "all cash" purchases, that appraisal should be nothing more than a confirmation for the lender of something I and my buyer client already know. I'm willing to counsel my buyer client to offer that much because I believe that property is worth that much for their purposes. If they're intending to "flip" the property, we should both have looked at that situation and decided we're comfortable with it before making an offer. If my client intends to hold the property some number of years, that appraisal has absolutely zero bearing on what it will be worth at some indefinite date in the future. And even if they are that rare "all cash" buyer, if the value isn't there in front of your own eyes to justify that price, why did they and their agent make that offer? Therefore, there really isn't a good reason for a buyer or a competent agent who knows what they're doing to object to dropping the appraisal contingency. When I'm listing a property, I'm very cognizant of the fact that insisting upon an appraisal contingency is a sign of an uncommitted buyer, overly cautious or overly opportunistic, who's insisting on having everything exactly their way and is likely to chip and chisel at every opportunity. Such a buyer is also likely to bolt at the first chance of a better deal. It's also usually a sign of an agent who doesn't understand the process covering themselves in CYA to a pointless degree, because they should explain it to their client when the issue comes up if not before. This kind of agent is analogous to someone who calls themselves a paratrooper because they wear a parachute - even though they've never actually used it and have no intention of making a jump. Both such a buyer and such an agent are signs of a deal that's likely to not get consummated.

Just like sellers and everyone else involved, buyers would really like a nice smooth transaction that moves from fully negotiated purchase contract to complete consummation as quickly as possible without bumps, burps, or deal killers. There will be bumps in most transactions that can't really be avoided, but most bumps are caused by problem personalities on one side or the other of a transaction. Unfortunately for sellers, there's a lot more information on their attitudes (and those of the listing agent!) in a typical listing than there is information on the buyers and their agent in a typical offer. Don't raise the barriers to a successful transaction any higher than you need to - and don't let your listing agent do so, either. Quite a lot of them will insist upon useless pre-qualifications and pre-approvals from their favorite loan officer. Not only is this steering, and therefore illegal under RESPA, but it doesn't do you any good on determining whether or not they actually will qualify for the loan, and this notation can warn potential buyers with competent agents off your property until that property has been on the market so long that you're desperate. Listing agents will often insist for no good reason "seller to select all services." What's going on is that they want to select all services so that certain specific title and escrow companies are happy with them. You didn't tell them you wanted to select the services, did you? Even if you did, the law is quite clear that it is subject to negotiation, not that this stops that sort of agent. Wander into their office at random intervals, demand a listing agent copy of your property listing (You are entitled to such on your own property) and if it has any of these notations, fire that agent and their brokerage immediately. You've got all the justification you need in the fact that they're not only violating the law, but your best interests as well.

Now that we've gone over what sellers need, let's look at what seller's want. As any good salesperson knows, wants are far more important to making a sale than needs. People are funny that way, and one of the harder parts of a good buyer's agent's job is keeping the actual needs front and center with the wants. Most people would not believe how many buyers will ignore faults that will cause them to hate this property in about two months in favor of really neat, but unnecessary amenities.

What buyers want is the perception of a bargain. Notice I didn't say they want the bargain - but they do want to believe that the property is the best bargain they could have bought for the price they could afford. Quite often, the appearance is more important than the actuality, and I've certainly experienced more than a few people who thought they got a deal and couldn't wait to brag to me - but here's the kicker: They never want to hear the evidence against the brag they're trying to make - and there's always evidence against as well as evidence for. Every last negotiating coup I've pulled off had evidence on the other side - that's what a good negotiator uses to convince the other side to deal. If they don't want to hear the evidence against, that's a pretty good indication it's stronger than the evidence for, and that they didn't get a very good bargain.

One of the ways in which this manifests is buyer behavior. If your property is more expensive than another one that's essentially similar, those buyers are not going to want your property. You have to convince those buyers that there is a rational reason why they should want to pay more for your property than for the competing properties. If you cannot do this, your property will sit unsold. This is the reason every competent agent in the known universe counsels against overpricing a property. It's not like all the sellers in your local MLS receive offers in turn, strictly in accordance with order of listing the property for sale. Quite predictably, buyers make offers upon the properties that are most attractive to them at a given price. If you cannot convince your own agent that the property is more valuable than the competing properties, that agent is doing you a favor by telling you to reduce the price. I guarantee that not only that your agent will be kinder than any prospective buyers will be, but that they're trying to save you money as well. It's always a balancing act between too expensive to interest anyone, and not expensive enough so that you lose money you could have gotten. But remember that it's the appearance of a deal than most buyers want, far more than the actuality. Most have no clue what stuff costs and how easy or difficult it is to accomplish a given upgrade. They only know that they didn't have to deal with accomplishing it, and for that, they're willing to pay quite a lot under the right circumstances. A good agent will help you with all of this.

Caveat Emptor

Article UPDATED here


Carnival of Personal Finance

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Georgian president says Russian troops have cut country in half

But a top official at the Georgian embassy in Moscow, Givi Shugarov, said Russian troops appeared to be moving toward Tbilisi and he alleged Russia's goal was "complete liquidation" of the Georgian government.

If all the Russians wanted was South Ossetia, there would be no need for this. Putin wants the soviet empire and soviet glory days back.

Russia trying to crush democracy, Georgia leader says

"We are in the process of invasion, occupation, and annihilation of an independent, democratic country," Saakashvili said at a news conference Monday.

"The goal of this operation is regime change in Georgia."

Saakashvili then abruptly ended his conference call with reporters, saying, "We have to go to the shelter because there are Russian planes flying over the presidential palace here, sorry."

Democracy is a threat to Putin and Russia's power. That and the economies of the West, which have been fueled by Democracy.

n an op-ed piece in Monday's Wall Street Journal, Saakashvili argued that the conflict is about "the future of freedom in Europe."

If Russia succeeds, Saakashvili said, it would mark the end of Western influence on any of the former Soviet republics.

"It is clear that Russia's current leadership is bent on restoring a neocolonial form of control over the entire space once governed by Moscow," he wrote.

and

"While we appealed to residents of Abkhazia and South Ossetia with our vision of a common future, Moscow increasingly took control of the separatist regimes," he wrote. "The Kremlin even appointed Russian security officers to arm and administer the self-styled separatist governments."

More, including a map of the campaign, at Powerline

More good sense at Q and O

Tigerhawk asks a very timely question: Where are all the condemnations from the so-called "anti-war" groups?

I suspect they're glad to see an evil ally of the oppressive US and George W. Bush's evil war get conquered.

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No surprise for anyone familiar with them: Deliberate Decisions Are the Best

When it comes to making life-changing decisions, neither snap judgments nor "sleeping on it" trump good old-fashioned conscious thought, new research suggests.

But people are lazy. They want a magic bullet for decision making. There isn't one, except to get the facts and consider the implications carefully.

In all experiments, there was some evidence that conscious deliberation can lead to better choices and little evidence for superiority of choices made "unconsciously," the researchers said.

Even if you get something wrong, you're better off with deliberative decision making than "sleeping on it" or "snap judgment"

"Our research suggests that unconscious thought is more susceptible to irrelevant factors, such as how recently information has been seen rather than how important it is," Newell said. "If conscious thinkers are given adequate time to encode material, or are allowed to consult material while they deliberate, their choices are at least as good as those made 'unconsciously.'"
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Name that Party, Detroit edition: Not one mention of the fact that he's a Democrat

This isn't any technical charge. He's out on bail awaiting trial for assault and perjury and various other corruption charges, including multiple felonies. During this period, he has violated the conditions of his release at least twice. And unlike the case of Ted Stevens, where he's accused of much less serious infractions and the press put his party (Republican) in the headlines and repeated it half a dozen times in the article, the AP couldn't be bothered to name Kilpatrick's political party once (to be fair, they did mention that his mother is a Democrat, although what relevance that has is beyond me).

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Calls for France to rethink its Africa role

A bombshell of a report by Rwanda this week implicating high-ranking French officials in the arming and training of Hutu forces that committed genocide in Rwanda - could have been issued last November. President Paul Kagame sat on the 500-page study, approved by the Rwandan Senate, for months.
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Okay, it's a nine and a half minute video. Anyone not susceptible to Jedi mind control will find it hilarious. The Vote Reaper

HT: The Anchoress

(The companion article is What Buyers Need: What Sellers Should Want to Supply)

Quite often, I hear people talking about the real estate market as if it's all some amorphous blob, and buyers and sellers are no more different than they are in the stock or bond market, or for that matter, people using the bank to make deposits or withdrawals.

I cannot agree with this concept. Real Estate is not liquid, and real estate is not commoditized, and in the absence of some future world government building precisely one identical housing unit with precisely the same environment for everybody, I daresay it never will be. Since the chance of the rulers of that government limiting themselves and their cronies to the same housing everyone else has are nil, you can take it from there.

Let's ask: What do sellers need? Cash, the universal problem solver. As much of it as possible. Why? Because there is something about this property that no longer fits their needs, and it would be more trouble, and more cash than it's worth, to change the property. If it was cost effective to convert the property to the configuration desired, nobody in their right mind would want to go through the process of a real estate transaction twice in order to sell this one and buy something else. The only thing they can really transfer from this property to that next one is the equity. More equity means they owe less on the next property, they can afford a better property, or they have more money left over after buying the next property. Most sellers want more money than is possible or likely, going to far as to shoot themselves in critical locations in pursuit of it. If they are not ready to be rational about it, there is nothing you can do to force them. You can decide you want the property bad enough to pay the extra or you can move on to other properties. Of course, in the former case, the property wasn't really overpriced, was it?

There is nothing sellers want so much as as much cash as possible. If the transaction doesn't get completed, they don't get their cash at all - so if the transaction doesn't complete, they don't get any of what they really want: cash. In fact, they spend cash for every day that property is on the market, or in the process of the transaction. If you don't understand this, whether you're a buyer, a seller, or an agent, you had better act as if you do. Even if they're in a short sale or other distress situation, time is important to sellers. I would rather have no offer than an offer a buyer cannot or will not make good on. Every day that property sits unsold costs that seller money - and this time does not end with entry into escrow and a pending sign. It ends only with a successful sale.

When sellers enter into a purchase contract, they are essentially closing down the prospects of any other buyer. A real estate purchase contract gives one particular buyer the sole and exclusive right to purchase that property until it is properly terminated. It not only gives that buyer the right to buy that property, it requires the owner to sell it to them on specified terms. If someone else comes along and offers a better deal, the current owner is not free to take that deal - they are contractually bound to the existing one.

Buyers therefore need to convince property owners of two very important things: First, that theirs is the best offer that they are likely to receive. Second: That they are capable of consummating this transaction, as proposed, in a timely fashion with as few uncertainties as possible. Many listing agents want to take this way too far, into the illegal territory of steering, but their client, the seller, does have a legitimate need to know that prospective buyers can consummate this transaction in a timely fashion. That seller is making a decision whether to grant a buyer credit, just the same as the lender. They are entitled to ask for information that paints a coherent picture of the prospective buyer in fact being able to carry through on their end of the transaction. Sellers are not entitled to steer the transaction, and unless they're agreeing to a carryback loan, they are not entitled to information of a level sufficient to enable identity theft, but they are entitled to ask for and receive information as regards actual FICO score, verified income, current debts, source of down payment. In other words, an attestation where the person making it can be held accountable for any misstatements. The standard pre-qualification and pre-approval letters are a joke - not worth the paper they are printed on. I do them because lazy and irresponsible listing agents ask for them, and it's easier (and more profitable for my clients) to comply than argue them out of it. But the seller's issues become the buyer's issues, because if the prospective buyer cannot convince the seller that this is the best offer they're likely to get, the seller won't agree to sell to them.

One more thing sellers want. Actually, both sides want this: a nice smooth transaction, that moves from accepted offer to consummated transaction without any problems, hangups, or deal killers. If there's anybody who's willing to stand up and say they want all of these obstacles, I've certainly never met them. Here's the issue: Even the biggest problem personality in the known universe wants a smooth transaction. It's just that their definition is where they proceed to chip and chisel away further concessions the entire time. When a good agent submits an offer, they want it to move as quickly as possible and without the need for any further negotiations to a consummated transaction. Ditto a good listing agent on the counteroffer. Every time there are further negotiations, there is the possibility that intransigence on someone's part send the whole transaction south, and the reason you agreed to that contract in the first place was that you thought it was a good bargain to be making, and therefore, you should want it to close. There are good reasons why there are further negotiations after the contract on most transactions, but there shouldn't be multiple sessions, let alone one every couple of days when the other side thinks of something else they want.

Unfortunately, there is no method known to man that can guarantee to detect such twits before entering escrow. A good agent can know what the signs are, and at least as important, what they are not, but sometimes the warning signs aren't there, and sometimes they are there for someone who really is going to play it straight. The only real way to deal with these twits is upon confirmation of their nature. You don't want to refuse any transaction that very well might lead to a consummated sale, but you do need to be prepared to exit the transaction when such twits reveal their true nature, and if you don't understand when and how to do it, a good agent will really save your bacon - from a suit for specific performance, and paying their legal fees as well as your own.

Needless to say, you don't want to be one of these problem personalities either. So when you agree to a contract, it should be with full intent of carrying through on exactly the terms agreed - no chiseling allowed, only specific solutions for concrete issues that happen despite anyone's best efforts. The best way of preventing problems later is to come to an agreement in the first place which the other side should be pleased to honor.

Caveat Emptor

Article UPDATED here


Absolutely vile: Threatening opposition campaign donors

They've been accusing Republicans of voter suppression for decades, even though the balance of evidence lies in the other direction. Now the left is openly attempting to intimidate likely Republican donors.

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Georgia and Russia are at war

Ostensibly, the reason is Georgia's attempt to bring South Ossetia back under its control.

In reality, that's a thin excuse. Gorbachev and Yeltsin made a decision not to fight secession of the 14 former soviet republics. For one thing, they couldn't fight all 14 at once with the soviet military in the state it was in, not to mention the failed coup.

Putin has made it clear he wants the rest of the empire back, and has built his rule in large part upon appealing to those who long for the glory of the Soviet days. He's made it clear that he's looking for excuses to re-acquire the seceded republics, while they're trying to break further from Russia's orbit.

Georgia, which borders the Black Sea between Turkey and Russia, was ruled by Moscow for most of the two centuries preceding the breakup of the Soviet Union. Georgia has angered Russia by seeking NATO membership - a bid Moscow regards as part of a Western effort to weaken its influence in the region.

The current president of Georgia deposed a soviet holdover in the Rose Revolution of 2003, putting Georgia squarely in Putin's cosshairs. South Ossetia, which wanted to reunite with Russia and whose de facto autonomous government is pro-Russia, is the excuse that he will use to justify conquest if he can.

More here

Bombs rocked Tbilisi early Saturday morning as the fight between Georgia and Russia over a breakaway region intensified and moved into the Georgian capital.

Tbilisi is the capital of all of Georgia, and it's more than a small distance away from South Ossetia. This should remove any doubts as to Putin's true objective.

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When a politician tells an audience what they want to hear, that's business as usual.

When a politician tells an audience something they don't want to hear, that's conviction, because it always risks alienating the few votes they need to win in a narrowly divided country.

In corn country, McCain says no to ethanol support

McCain has never been shy about speaking against subsidizing ethanol when he is in farm country, though that stand helped to make him unpopular enough in Iowa that he skipped participating in its leadoff presidential caucuses in 2000 and again in 2008.

I don't agree with everything John McCain is campaigning on, but we need more people who realize it's not good for the country to do everything that everybody wants, simply to win a few votes on the margin.

And unlike his major opponent, he makes a habit of saying where he disagrees with people, even though it may cost him votes - which means there's good reason to believe it. Obama tailors his positions to the audience, telling some audiences one thing, the next audience something entirely different. What Obama was saying he would do was completely different in the primaries than what he is saying now that he has the Democratic nomination locked up. Where does he really stand? What does he really believe? It's hard to tell. The only real evidence is his past votes - and a president should not vote "present". You know where John McCain really stands on an issue, because he's willing to risk losing those voters, and pay the cost for his position.

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Instapundit on the new Obama salute.

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A threat on Obama's life? Very newsworthy! Stop the presses!

A threat on President Bush's life? Not so much.

Put the former on Page one. Edit out the latter. Somebody might say this sort of action says something about those who do it. They'd be right.

Especially in conjunction with this, what might a reasonable observer deduce as likely?

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The Olympics start today. In Beijing, China. Home of one of the most repressive governments on earth, and the most widespread sponsor of other repressive governments.

I think the site selection committee needs to get fired.

Here's an article that got me thinking

Bulgarian archaeologists discover ancient Thracian chariot

These were the same Thracians spoken of in all those Greek and Roman records and mythical stories. Thracians appear in Classical literature starting with The Illiad. What happened to them?

The Thracians were an ancient people that inhabited the lands of present day Bulgaria and parts of modern Greece, Turkey, Macedonia and Romania between 4,000 B.C. and the 6th century, when they were assimilated by the invading Slavs.

With very few exceptions (maybe some parts of Australia, maybe deep in the Amazon jungle, and possibly a place or two like the Kalihari in Africa), there just isn't anywhere where the original natives are still around. The so-called "Native Americans" "assimilated" at least one earlier wave of settlers, which is an anesthetic way of saying, "killed the men, enslaved and raped the women, and nobody is quite sure what happened to the children." Ditto just about everywhere else. In fact, most places have had multiple known waves of this, and there are almost certainly ones we don't know about. here's a very partial list of the ones we do know about.

It's a good idea to keep this in mind when considering world politics. It's been washed and dressed up, but (for instance) the Arab government in Khartoum and the Janjaweed are no better at the root than Attila's Huns, and perhaps worse. China's Great Wall was a (futile) attempt to shut out the barbarians who had invaded in waves previously, with the hope (frustrated) of being able to ignore them. Look up the meaning of "Hindu Kush." We're dealing with the same culture today. This wasn't anything the "Evil" Europeans of the Age of Discovery had to teach anyone. Pretty much every native polity they encountered had previously "assimilated" one or more rival empires. In fact, when you compare how the Europeans treated the conquered peoples, what stands out is how much better they were than any previous practice. If you want proof, consider this: 500 years after rounding the Cape of Good Hope and discovering the New World, there are still identifiable parts of the previous cultures in place, and people who are recognizably descended from those people. Most of the languages are still spoken, in many cases as the primary tongue of the area (my wife's great grandfather, in southern Mexico, did not speak Spanish according to his son, and there's still areas of Mexico where that applies). If I'm uninformed, maybe some anthropologist will enlighten me, but I'm not aware of any other instance where this applies to conquered people.

"Ethnic cleansing" is a new name for a very old practice, and the evidence is overwhelming that it's an easy thing to give into. It's only changing very slowly, and it's not for no reason that those with territorial ambitions would very much like to take down the nations behind this change. Take away the United States and our allies with elected governments who have been trying to limit this for the last few generations, and the world goes back to conquest as usual.

Over at my other site, the fourth in my series of Neighborhood articles is up:

Neighborhoods of La Mesa: Maryland Avenue

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It's not news, it's Scrappleface: funnier and more clever than The Onion!

BREAKING: Zawahiri Dead, Global Warming Suspected

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Debunking "straw man" arguments

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via Instapundit, The Spoiled Children of Capitalism

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I'll bet the Beijing government is angry:

Lopez Lomong chosen as American flag bearer at Beijing Olympics

BEIJING -- Another stunning chapter was added to the incredible story of Lopez Lomong when his U.S. Olympic teammates chose the Sudanese refugee as the flag bearer in Friday's opening ceremony at the 2008 Olympics.

That's gotta hurt.

But let us give the people who chose him a standing ovation. I don't think there's been a better statement made since Jesse Owens at the Berlin Olympics of 1936.

I'm glad he's American, even though I am sorry he had to go through what he did to get here.

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Disgraceful: Baffling process suppresses military voting turnout

They're deployed overseas because they're serving the country. We should make it as easy as possible for them to vote. It's not like the military has any doubts whether they are a living citizen officially resident in whatever precint.

This one can't be laid at the feet of the military. It's the states and local registrar's that erect these hurdles. But DoD should see what it can do to fix the problem. It's probably not as important as making certain the troops get everything they need, materials-wise. But it's a lot more important than, say, congressional or presidential junkets, no matter who is making them.

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One of Speaker Pelosi's middle class "handmaidens of the oil companies" has a rebuttal

With a hat tip to that same website, Neptunus Lex channels the ghost of Dr. Seuss

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How far is the Washington Post in the tank for Obama? Page 1 stories of "unusual" donors to John McCain's campaign. Problem is that three out of four weren't donors after all, as a quick visit to opensecrets.org would have exposed.

So much for "layers of fact checkers"

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If even half of allegations contained in this video are true, things just got a lot scarier.

I have not yet investigated. Most of it seems credible, although I'm more than a little concerned over stealing the elections complaint books that was captured in the video also. If we allow the electoral process to be subverted, where are we? No matter how "enlightened" the beneficiary allegedly is.

It could be the first actual smear of Obama I've seen this campaign. It could also be a harbinger of the end of democracy in this country.

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Thoughtcrime: Something straight out of Orwell.

I've experienced it locally also. It's very hip in certain quarters to denigrate the humanity of those who disagree with you politically.

Yeah, I've heard Rush denigrate the priorities and the thinking of those on the left. But I don't listen to Rush when it's my choice, and even he doesn't say or act like their politics and priorities somehow make them less than human.

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Hugo Chavez is defeated in the referendum he held to increase his powers even further, so he does it by decree


The answer isn't quite "Their lips were moving,"

There are some lenders who make a habit of quoting real loans at real costs that they have reason to believe they can deliver. With probably a much larger number, however, the rule of thumb is that they will tell you whatever it takes to get you to sign up with them, regardless of whether it's true or not. This is fueled by perception of cost and cognitive dissonance. When you're initially shopping a loan, you have very little commitment to the idea. If the prospective lender can imply that the costs will be cheaper than it actually will be, it's easier to generate the business. As you go through the process of getting the loan - loan application, appraisal, etcetera - your degree of "buy in" increases, to the point where about eighty five percent of everyone who finds out they were lowballed at sign up will still sign the final paperwork for the loan. Furthermore, the paperwork is complex enough that over half of those who were lowballed literally never figure it out.

This creates a bizarre set of incentives. Why should lenders tell you the truth at sign up and risk you walking away leaving them with nothing? Especially when half the people never figure out they were lowballed and eighty five percent of those who do will sign the final paperwork anyway. For those keeping score at home, this means above a ninety percent probability that the lowballer will get paid for a completed loan, versus a very high probability that your prospective customers will go with someone else who pretends to have a better loan if this lender tells the truth. Furthermore, they'll quite likely pull your business away from a competing loan that would have been better in the final analysis, but the loan officer there was honest and told you the truth about the loan they could do - the rate and costs. Note that this doesn't mean you'll actually pay less - the real costs are still there, and you'll still pay them. Nonetheless, the whole lowballing scenario is a win for most lenders and loan officers, because even if the client does figure it out and gets angry, the odds are overwhelming that they get paid for a loan, as opposed to not getting paid for a loan. For consumers, the only thing signing up with a lowballer does for you is allow you to fool yourself. Since this makes a huge difference as to which loan (or loans) are the best ones to apply for, but can lead to paying thousands to tens of thousands of dollars in unknown and undisclosed costs that can mean it wasn't really worthwhile to get that loan at all, to soaking up so much money on a purchase that you don't have the down payment you were expecting, to even forcing you to beg money at the last minute from friends and relatives in order not to lose your Good Faith Deposit (along with the property you thought you were buying).

If all of these issues sound like an interesting and exciting challenge to you, you should probably stop reading right now. The rest of the article will be a waste of your time. For those of us who like to have real estate transactions flow easily and in a predictable and stress-free manner, however, avoiding these issues is worth learning what you need to know and planning ahead. But most lowballing lenders won't suddenly become paragons of virtue simply because you ask them to. You need to force them to be honest.

There are two basic components to this strategy. The first is to remove the ability of the lender to pretend charges don't exist by not talking about them. People rant and rail at "junk fees", but the cold hard truth is that most so-called "junk fees" are not junk fees at all, but legitimate costs of the loan that the lender simply declined to tell you about, lest you take yourself to another lender. This is quite legal, by the way. One of my first articles explained the Good Faith Estimate and the lowballing games that can be played, quite legally. The most recent update of that article is Good Faith Estimate. The equivalent article on California's MLDS is on my professional site. Require them to fill out every line on either form with an actual number of dollars - no PFC, POC, or anything else. If the number is zero, say it's zero. This gives you a real idea of what all the charges should be.

There is a better, simpler, alternative, that's far simpler for most folks: Force the lenders to quote a loan type, the rate, and the total costs of doing that loan - including all third party fees - and guarantee that total, in writing. Note that this doesn't include the money needed to set up any Impound account and it also doesn't include prepaid interest, both of which are money that most people prefer to roll into their mortgage balance if they can, but are not costs because they are your money that goes to pay for things you would have to pay for anyway - property taxes, homeowner's insurance, the interest on that monthly payment that you never actually skip. It's still a better idea to come up with the money for these "prepaids" out of pocket if you can.

But if lenders guarantee their quote in writing, this removes the incentive to low-ball. You're only paying $X, end of discussion. Any money over that that the loan costs comes out of their pocket - dollar for dollar. So anything extra they try to gouge you for comes straight back to you from them. Yes, you need loan type and the rate to be part of that guarantee, because there is always a tradeoff between rate and cost on loans, and if you lock down the cost, they boost your interest rate by one or more steps to pay the difference. Lenders don't like making these guarantees, and not just because some folks won't qualify, but because it removes their ability to lowball you. But if they're talking about a loan that they really have, and can really deliver to you on the terms they're talking about, they should be willing to make such a guarantee. If they won't, there is a reason, and it tells you all that you need to know about their truthfulness.

Another one of my early articles covers the Questions You Should Ask Prospective Loan Providers (link is the most recent update). Print it out, take it with you when loan shopping. Make copies and record the answers from each prospective lender if you want. Each and every single question on that list will save you from problems most people don't know or don't ask about. If a prospective lender starts hedging too much, you know there's an issue. Terminate the interview, and find a different lender.

It's very easy for mortgage lenders to sell you upon the benefits of a much better loan than they have any ability to or intent of delivering to you, and to do so legally. You can take steps to defend against such, or you can be one of the victims. It is overwhelmingly likely that a guaranteed quote is real and deliverable, while a quote that isn't guaranteed will be far more expensive in actuality despite a lower quote, because a non-guaranteed quote is literally so much hot air. By themselves, the standard forms you get at loan sign up are worthless. But the fact is that any kind of competent loan officer should have a pretty good idea what is and is not deliverable, while consumers have no such reliable pipeline of information. Requiring a good guarantee puts the responsibility for paying any increases where it belongs: On the lender and loan officer, who have the necessary information to quote loans that are really available and deliverable to someone in your circumstances, but usually find it to their advantage to quote significantly less than the actual costs in order to get you to sign up with them.

Caveat Emptor


Carnival of Personal Finance

**********

Solzhenitsyn death leaves complex legacy in Russia

He spoke out against the communist abuses because he loved his homeland - but he wanted Russia to be powerful as well. By the time of his death, he was completely aligned with Putin.

But in his earlier years, he spent years as a prisoner of one of the most brutal, repressive regimes in history, in a system that has given it's name - Gulag - to a phrase of international horror, than an exile. He examined it without blinking, and stood up to be counted despite the personal cost. That's really speaking truth to power - not twitting an American president that since his term began has imprisoned precisely zero political opponents.

Ironically, without Kruschchev wanting to discredit Stalin, his "One Day in the Life of Ivan Denisovitch" would probably have never been published, let alone anything else.

**********

Where I come from, we call this lying by omission. Obama took in a comparable amount of contributions from oil company employees and executives in the same time frame, but that's okay, because he's really the good guy, while McCain is that Evil Republican? I don't think so.

the ad is here

via Instapundit, the Ohio Republican Party has a great response. The music makes this one worth watching.

**********


Obama makes a shift, says tap oil reserves

Barack Obama proposed tapping the strategic oil reserve on Monday to help lower gas prices, reversing an earlier stance, and called rival John McCain a tool of big oil companies as rising energy costs took center stage in the U.S. presidential campaign.

In other words, with the direction of the political wind clear, he's trying to make it look like he's flipping to the majority opinion, but if you notice, all he's doing is talking about tapping the strategic reserve, which is a small and pretty static amount (70 million barrels, about three days supply), not bringing any additional sources of new oil online. He's still anti-drilling, and since John McCain favors new drilling, John McCain must therefore be a tool of big oil. It's like prices that have more than doubled in the last five years, the consequences of those rising prices of every segment of our economy, and serious concerns about the political stability of some of our largest suppliers don't exist.

What's mildly frightening is that Obama acts like he expects people to believe this. I mean, PT Barnum's classic underestimation ("One born every minute") not withstanding, there are limits.

**********

The Republicans are keeping the pressure on Nancy Pelosi regarding energy

Wizbang has more.

Good. About time congressional Republicans started acting like something other than Democrats lite.

Let's do a thought experiment. Any market in any commodity has two components: The demand, or willingness and ability to pay for that good, and the supply of that good.

Let's consider the demand half of that first. Specifically, ability to pay.

According to the most current credible statistics I could find, San Diego Demographics & Household Information, we have 421,952 workers in San Diego.

Let's consider what this means, first in terms of how much they make, and how many dollars they can afford to lay out:

Column 1 is the range, column 2 is how many workers reported that income, column 3 is percentage of workers in that bracket, column 4 is taking the middle of the range and translating that into dollars per month, and column 5 is what percentage of the total working population can afford that much or better.

Here's the income ranges and frequency:



Range
< $10,000
$10,000-$14,999
$15,000-$24,999
$25,000-$34,999
$35,000-$49,999
$50,000-$74,999
$75,000-$99,999
$100,000-$149,999
$150,000-$199,999
$200,000+
number
8463
25,745
54,563
54,499
70,654
87,022
50,494
43,452
13,558
13,502
pct
2.0
6.1
12.9
12.9
16.7
20.6
12.0
10.3
3.2
3.2
midrange monthly
$416
$1041
$1666
$2500
$3541
$5208
$7291
$10,416
$14,583
$20,000*
afford pct
100
98.0
91.9
79.0
66.0
49.3
28.7
16.7
6.4
3.2

Now, let's stop a minute here. Someone making less than $10,000 per year is not a full time employee. Minimum wage is $8.00 per hour in California, times 40 hours times 52 weeks is $16,640. So the folks in the first two ranges are not working full time. Period, end of discussion. I think they should have housing, but I have my doubts whether we should be concerned about whether they can afford detached single family residence type housing on their current wages. In most cases, I would posit that they're either teenagers working for pocket money or retirees working for whatever reason strikes them as sufficient. Also, I should mention that I arbitrarily used $240,000 per year as midrange for those folks making over $200,000. Such an estimate is probably too low, but let's face it: Those folks are doing fine.

Now, let's look at what these folks can afford: I took the midrange monthly for that salary range, and assumed they bought, with 5% down, a condominium with HOA dues of $225 per month, or a single family detached home with insurance of $100 per month. This assumes they do all their own maintenance for the detached home, but someone sufficiently determined can at least approach this. I assume property taxes of 1.25% per year (slightly high for most of California), and a fully amortized FHA type loan at 6.5%. For purposes of this exercise, I didn't stress about Jumbo or conforming, as I used the FHA as a basis, nor did I concern myself over whether it fits within FHA limits, as the point of this is simply to perform a thought experiment: How much house people can afford under these assumptions, which are quite reasonable. Once again, it would break down at the higher end of the scale, but folks on that end of the scale are doing fine. I was mostly after was Joe and Jane Average can afford. These numbers given are in terms of the loan amount, not purchase price, which the loan amount was assumed to be 95% of (in other words, $95,000 loan amount means it was $100,000 purchase price).

Column 1 is once again, that monthly midrange, Column 2 is 45% of that, the traditional back end ratio. Column 3 is the maximum condo loan they can afford, under the conditions described, Column 4 is the single family residence, and Column 5 is, once again, what percentage of all workers can afford this level or better.

Let's take a look at the results:



midrange monthly
$416
$1041
$1666
$2500
$3541
$5208
$7291
$10,416
$14,583
$20,000*
Housing+debt serv
$187
$468
$750
$1125
$1593
$2343
$3280
$4687
$6562
$9000
condo limit
n/a
$32,000
$70,000
$121,000
$184,000
$285,000
$412,000
$601,000
$854,000
$1,183,999
house limit
na
$49,000
$87,000
$141,000
$201,000
$302,000
$428,000
$618,000
$871,000
$1,199,000
afford pct
100
98.0
91.9
79.0
66.0
49.3
28.7
16.7
6.4
3.2

So even though someone making $12,500 per year is not a full time worker, they can still afford roughly a $70,000 condo if they want to own badly enough to do what it takes. I'm assuming fully amortized 30 year fixed rate loan, which when the loan is paid off, gets your monthly cost of housing down under the inflation adjusted equivalent of $300 per month in current dollars. There may be only 35 of these currently for sale as I log onto MLS, but I can't tell you why there are any.

Put two of these folks together, a married couple or two friends, it doesn't matter. Remember, neither of them is working full time, and they can afford a $250,000 condo loan under conditions described (Remember, there's only 1 HOA fee, and taxes are only collected once). Insist it be a minimum of two bedrooms, even. There are 3600 Active Listings right now that are asking at or under this price, and almost 3000 have sold in the last twelve months in San Diego County. No, these places aren't right by the beach or in downtown La Jolla, but they are affordable, they're livable, and they put your housing situation and cost forevermore under your own control.

Someone making $15 per hour, in the middle of the fourth range, is about where most folks would start saying, "This is someone who should be able to buy something," and they can: $129,000 worth of condo loan. 594 Actives asking that or less, 383 sold in the last twelve months. Get a roommate, friend, or spouse making the same amount, and you're looking at $273,000 worth of condo, more or less, or $290,000 worth of house. 4100 actives are asking $273,000 or less, even if you restrict your search to two bedrooms or more, and over 3700 of them have sold in the past year. Even if you restrict the search to detached housing, there are 1700 actives where the asking price is $273,000 or less. Two-thirds of all workers can afford this level of housing. In a market where the restrictions on building artificially limit the supply of housing. They may not have travertine floors and granite counters, but the majority of the people in the world would jump at the chance to live in them.

Let's consider someone in the middle of the sixth group, with a spouse in the middle of the fourth. By themselves, that professional can afford $285,000 of condo loan, $302,000 of house loan. Add in the spousal income, and you've got $437,000 worth of condo, $454,000 worth of house. Now, we're just talking over-inflated expectations, unwillingness to economize in other areas of your life, or some combination of the two. In any case, it's no longer affordability - it's that the folks don't want to do what it takes. My Gran had a standard answer for children like that, humiliating and painful, but a lot less so than missing this opportunity will be. Tough old gal, my Gran. Raised a family of six by herself through the Great Depression after second husband died, and she didn't take nonsense or whining from anyone. There are 9500 Active listings where the asking price is under $437,000. I can find you a fairly nice piece of property in pretty much any area of the county for those prices. Just under half of all workers, including part timers, are at this level or better, and the breadwinner (or main breadwinner) is smack dab in the middle of the most common earning range for all workers, and the secondary worker, if we're using one, is two income groups down. People have the ability to pay these prices if they want to. The ones who want to will find themselves sitting very pretty in a few years.

Why do I say that? Because of the supply situation. It's not like we can expand indefinitely in all directions. The Pacific Ocean is wonderful, and it brings a lot of people to visit and most of them want to stay and it helps moderate the climate, but you can't build housing in it. Lots of San Diegans like visiting Mexico, and quite for a number of them, the proximity of Mexico adds a lot to being here in sunny Southern California, but once you cross that border, you're no longer living in San Diego, with all the advantages of life in the United States that start at economic opportunity, run through a government that's actually somewhat accountable to its people, and where there's something resembling a rule of law. Great place to visit, Mexico, but I don't want to live there, where everything is subject to the whims of one of the most corrupt and unaccountable systems of government ever. It appears that pretty much everyone agrees with me. Then there's Camp Pendleton on the north. You can try and take it away from the Marines if you want. I'm not that stupid. They've got the US Government bankrolling them - their armor and weapons and ammo are government issue, which means that you're paying for them to shoot at you. Yes, this is more than a little over the top. The point is, Camp Pendleton is off limits to expansion.

So is most of the eastern portion of the county. Cleveland National Forest, don't you know. Great place to visit, hike, sightsee, camp - but people aren't allowed to live there. 300 million Americans, including all of your neighbors who have already bought and want prices to rise for when they sell, have set up the rules setting that land aside. This might change at some point in the future, but it would take, first, over half of all 300 million Americans changing their mind, then fighting epic court battles as the minority takes every chance possible to keep developers out. They have quite a lot of avenues to stop it; fifty years probably wouldn't be enough. Not to mention eighteen Indian Reservations, and none of the tribes appears eager to sell land to outsiders for tolerably obvious reasons. Lease it, yes. But most people want to own the land, and leasehold property has a fraction the value of land owned outright, even if it's held in a common interest development, because at some point, all leaseholds end and the property, together with all improvements, reverts to the actual owner.

Even in the settled areas where development is possible, look out your window, anywhere in the urban and suburban areas of San Diego. Chances are you're not seeing vacant land. Even if you are, there are zoning and use restrictions and open space preserves. Beyond that, there are permits required and environmental studies to fund, and let's not forget the court battles than pretty much anyone looking to develop open land can expect these days. They started fighting over what's now the 56 corridor in the late 1970s, and the battle still isn't over, by which I mean there's people who want to develop but still have court battles to win and environmental hoops to jump before they can. Question: Do you think all of this makes the supply of available housing greater or less? What do you think constricting the supply of housing does that do to the price of housing? Every time somebody wants to move to San Diego, and there isn't the housing supply for them, two things happen. One, the price goes up by just that little bit necessary so that one person can no longer afford housing. Two, you've either created a homeless person, or someone has been forced to leave.

There are an awful lot of people that want to live here. Add the weather and the beach to the economic opportunity and everything else that the area offers, and you're repeating those two events from the end of the last paragraph many times over. Price going up, people becoming homeless or forced to leave. Multiply them by three million residents of the county, and what do you have? Pricing goes up, up, way up. The "Sunshine Tax" people talk about that we pay for living here is quite substantial. There are areas of the country where two people living on minimum wage can buy a pretty good house. This isn't one of them, and never will be again. The supply is too limited, and the demand too high. Nor is it all housing that we're considering here. It's only that fraction that the current owners have voluntarily decided to sell. If 99% of the current owners are happy where they are and don't want to sell, only 1% of the properties that exist are available for those who want to buy. They bid against each other until enough people drop out of the bidding that there is a one to one match between sellers and buyers.

Let's look at what it took to bring the market to this pass. For several years, more than eight out of ten properties was purchased with an unsustainable loan. People literally did not believe me when I quoted official SDAR and SANDAG statistics that said forty percent of all purchases were with a negative amortization loan, and another forty percent via an interest only 2/28 or 3/27, and both of these were usually stated income. Agents didn't want to tell people to settle for what they could afford, and in the Era of Make Believe Loans they didn't have to. Nor did they want to risk their commission checks by having buyers find out they couldn't afford the prices they were agreeing to pay, and if one loan officer was telling people what they really could and could not afford, there were plenty of others who'd keep their mouth shut and pocket the commission check. Buyers, for their part, weren't exactly models of restraint either. If anyone did try and buck the tide in order to tell them they really couldn't afford a certain property they had their heart set on, they would simply find someone else who'd keep their mouth shut and make it happen.

This all ended rather predictably. Wile E. Coyote looked down, by which I mean that buyers stopped buying. In one of my first on-line articles, I wrote how I had called our county assessor out over this wishful thinking. Prices stopped rising. The increases in value all of the agents, loan officers, and buyers were banking on in order to make the situation not self-destruct came to an abrupt and screeching halt. No increases in value meant that refinances wouldn't fly. Few people could afford new payments, closing costs, pay their loans down enough to enable them to refinance, or do anything else to salvage the situation. Indeed, the sudden wave of all this happening meant there was a veritable tsunami of people who had no other choice but to sell. Indeed, inventory through most of the last three years has been four times or more what it was when the market was hot. When four times as many properties come onto the market, and their owners have no bargaining power, and suddenly nobody wants to buy, it's no surprise the momentum of the market has shifted. It would have been a miracle greater than parting the Red Sea if it hadn't gone the opposite direction just as strongly as it had been going up before. Remember, Supply and Demand.

Let's look at what's happening now. The forgoing chaos created a limited window of opportunity, and that window has started to close. Active Inventory is currently 17,344 listings in San Diego County. This is down almost 1000 in the last month, 5000 in the last four. It's a 24 week supply, down from 26 at the beginning of July. People are figuring this out, despite heavy negativity in the media. The ratios of short sale to foreclosure are shrinking also, as the distressed properties move through the foreclosure cycle. Furthermore, as I said a couple of months ago, a lot of what's out there is still in denial. I was searching detached properties with asking prices below $460,000 in La Mesa earlier in the year and getting roughly 140. I just searched at or below $500,000 and only came up with only 107. Furthermore, it's hit the good stuff disproportionately - all ten of my most recent Hot bargain Properties are off the market. The situation is similar in Santee (104 under $500k now as opposed to mid 130s below $460k), El Cajon (311 vs nearly 400, same circumstances), and San Carlos (18 now vs 33 last time I checked, once again with the maximum search price raised now).

So, does this sound like an overpriced market due for more of a fall, or an underpriced market beginning a recovery? Shrinking inventory at higher prices. Heavy competition for the bargain properties. People able to afford the prices that are being asked with full documentation loans, fully amortized, instead of needing stated income, interest only or negative amortization loans to qualify?

The time of greatest affordability is in the past. If you're looking to buy in San Diego, the time to get off the sidelines is now. The current generation of executives at the lenders who enabled the Era of Make Believe loans has learned their lesson. The ones that survive are not going to relax loan standards to where they were two years ago any time soon. There's not going to be another bubble fueled by speculative loans. There will, however, be an extended period where the disparity between supply of and demand for housing in San Diego is going to get wider and wider, rents are going to increase, if anything, faster than purchase prices, and it's only those who have bought who are in control of their housing situation. Quit trying to time the market - you've already missed bottom, and even the lenders have started admitting it - removing the declining market designation. In case you are unaware, that's a trailing indicator, happening after the fact, not a predictive indicator. If you want to buy here in San Diego at the best prices possible from here on out, it's time to get off the sidelines and act.

If you want to talk, here's my contact information.

For the sellers who have managed to hold off this long, it's only going to get better for the forseeable future, and therefore I'd hold off if I had other options. The only exception is if you want to move up to something more expensive, in which case, let's get a move on! Otherwise, wait. If you're selling to move elsewhere or move down, things are only going to get better as inventory drops and more buyers figure out that we've already hit bottom and are on the way up.

Now, as to whether these conclusions apply outside San Diego County: They do not. There is no such thing as a national housing market, and even a countywide market like I'm talking about here is pretty much a fictional idea, applying only as an amalgamation, as each and every neighborhood of every city in the county is different. But these methods of analysis apply everywhere. In the case of San Diego, they yield an increasingly coherent picture of market recovery. Your local results will vary with your local conditions.

Caveat Emptor


Another in my series on local neighborhoods is up: Neighborhoods of La Mesa: Vista La Mesa

**********

Who qualifies for mortgage help and how to get it

In short, not many.

This is one of those times when government work seems especially like the love life of elephants

1) All the important business is done on a very high level

2) Any developments are announced with a great amount of trumpeting, noise, and fanfare (although Without fanfare, Bush signs mortgage relief bill: He's treating it for what it is. But then he's not running for any office, ever again)

3) Quite often there's nothing produced, and when there is, it's more difficult and takes longer than you'd expect.

(The second article, about signing without fanfare, says it'll help about 15% of the homeowners in trouble. I think that's significantly on the optimistic side - I'd say a max of 10%, perhaps only two or three)

**********

Obama links McCain to 'reckless' GOP economics

"We don't need the same old tired answers," Obama said. "We need something new."

Of course, he declined to give any specifics as to exactly what his new answer is

"I'm ready to duel John McCain on taxes right here, quick draw," said Obama. That drew a quick retort from a McCain aide.

The response from McCain's aides was perfect:

"If Barack Obama wants this so-called duel then why did he and his entourage run for the hills when John McCain challenged him to 10 town halls," said McCain spokesman Tucker Bounds.
"These anxieties seem to be growing with each passing day," Obama said on a campaign trip in this economically ailing battleground state. "We can either choose a new direction for our economy or we can keep doing what we've been doing. My opponent, John McCain, thinks we're on the right track."

As opposed to the man who wants to raise and spend an extra $500 billion per year for a civilian law enforcement agency to be coequal to the Pentagon. Anybody want to volunteer how that's to help the economy? That's definitely not a "new direction" most people hoping for better economic opportunity would want. For that matter, can anyone give an example of a nation that's created that kind of thing without turning totalitarian, or being totalitarian in the first place? Any historical parallels come to mind as to how Obama wants to limit how he, his policies, and his family (who actively campaigns for him) are criticized? Especially considering that it's more likely all the pigs in the world will simultaneously sprout wings and fly than that the Democrats will lose control of Congress this year, and therefore the political opposition would be limited to filibusters in the Senate?

Ladies and Gentlemen, it's way past time to be concerned about the effects of an Obama presidency on our civil liberties as well as our economy.

**********

Too good not to link: Al Gore Places Infant Son In Rocket To Escape Dying Planet

**********

Good sense on lobbyists from Ed Morrissey

**********

Nancy Pelosi adjourns Congress for a month. Republicans think there's unfinished business. So the Republicans are on the House Floor, talking about energy policy.

They can't accomplish anything legally. They don't have a quorum. But it's a good stunt, and making good use of social media to get the word out despite commercial media's determination to avoid covering it. It definitely shows where they stand on the issue, which is a lot closer to rational than where the Democratic leadership stands.

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

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