Weekend Open Thread (2009-12-18)

Here is your open thread for the weekend beginning Friday December 18th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

131 comments:

  1. 1
    The Tim says:

    Whoops, sorry this was posted so late.

  2. 2

    Have Any of You Bloggers Seen the 3-D Movies Out Lately?

    Christmas Carol is an over-used boring story, IMO, but the new animation is real looking and this version isn’t no kiddy-tale….it costs a few bucks more, but the 3-D version is cool, the snow falls on your lap. Real 3-D and IMAX 3-D are close in comparison, IMO. I’d give it a B+, a very good movie over-all, albeit expect to cough up $9 for the matinee rates.

    Avatar is out this weekend, a billion dollar production….probably worth seeing, but I like watching the movies with no one in the theater, so wait a week or two IMO for the audiences to thin out. It comes in IMAX 3-D too, but many theaters don’t have this 3-D capability, AMC at S. Ctr does…there were 4 people at the Christmas Carol AMC S. Ctr Matinee showing…LOL

    Hey, did you know the Renton Theater is closed….another one bit the dust….

  3. 3
    Ray Pepper says:

    I dislike 3d and I didn’t like A Xmas Carol. I get headaches.

    Go see Precious if you want to get pissed off… I had never heard of Monique until I left the theatre. Theres an oscar winner there.

    Also nothing better then The Hurt Locker when it gets released again for the Oscars.

    I also got a kick out of 2012…The special effects were worth the price of admission but the story line was way too far fetched and almost stupid.

  4. 4

    RE: softwarengineer @ 2
    I just noticed that the Renton Village 8 theatre is closed. Renton just had too many theatre screens with the The Regal Landing 14 and East Vallley 13 ( which is now a three dollar theatre, my fave.). Something just had to give.

  5. 5
    Trigger says:

    But still there is no deflation and depression style stock market meltdown. What is happening out there? We are piling more debt for sure but it looks like this more debt and money printing helped us to avert
    – deflation because we were able to restore lost monetary base
    – depression because there is still money floating around

    Should be bow down to Helicopter Ben?

    Banks are also revving up. Goldman Sachs is cool and relaxing.

    I think it is time for some serious hiking and skiing.

  6. 6
    AMS says:

    RE: Trigger @ 5 – “Banks are also revving up.”

    More like the FDIC is revving up to shut banks down.

  7. 7

    RE: Ira Sacharoff @ 4 – Was that the crappy old one just NE of the 405/167 interchange? I only went there once, and never wanted to go back. The only theater I can remember that was worse was the old one up at Northgate.

  8. 8
    One Eyed Man says:

    RE: AMS @ 6

    But probably in smaller numbers than the RTC days.

  9. 9
    The Tim says:

    RE: Trigger @ 5 – Good read on the alleged avoidance of a depression: The recession is over but the depression has just begun

  10. 10
    Dawn Glover says:

    I’m having a conversation with Ardell on RCG about Buying VS Renting and it’s going nowhere. This is my first attempt at blogging and I’m sure that I am not going to be able to convince a Real Estate Agent that it may not be a good time to BUY. She is definately not offered any information that would convince me otherwise, other than my children will be dissapointed that they can’t paint their rooms and they may not like to move. Those are some valid points but thanks to this site I’ve negotiated the same rental house for 3rd year all while lowering my rent and having improvements and maintenance completed. It is true that my kids were dissapointed about the paint so we all went out and picked up new bedding and fabric coverings and painted the shelving. We are making the prospect of moving this summer appealing to them because I will be sure to negotiate with the next landlord painting of the childrens rooms :) I guess I’m blessed with understanding children otherwise I may be guilted into making the biggest purchase of our lives based on the color of the walls. I’m guessing that the sales tactic of trying to make the customer feel like a loser has worked in the past…interesting.

  11. 11
    AMS says:

    RE: One Eyed Man @ 8 – Let me be clear: I don’t think the bank failures will have any significant direct impact on the total economy. It might shift a majority of the risk from shareholders of the failed institutions to the FDIC. I don’t see the current rash of bank failures as having a major downward pressure on home prices; conversely, I do see lower home prices causing problems for banks. Then there is the issue of loan origination fees, which have gone down drastically.

    That said, I do note the general sentiment that people hold toward the WaMu takeover. I am not suggesting that the takeover was right or wrong, but rather that even a “smooth transition to JPM,” was not exactly smooth. This may be contrasted to the direct financial impact discussed above. WaMu fails, and many people are not thinking, “We live in prosperous times.”

    I was trying to buy a part the other day. The manufacturer, based in the Seattle area, failed in December 2008. The problems in the financial markets essentially did the operation in. Now left without any support, I scrapped the product. Just one more loss that’s attributed to the times we now live in.

  12. 12

    RE: Dawn Glover @ 10 – Not all agents think like Ardell. If you go back far enough in their archives (maybe a year) you’ll see I used to spend a lot of time arguing with Ardell about a lot of things.

    Often the arrival of a new child is something that will get an owner to want to move from one property to a larger property, but I’ve never heard the argument that you need to own to have happy children. In fact, I’ve often thought that if your parents were in foreclosure that would probably be pretty devastating for a kid once the other kids at school found out. Assuming a worst case scenario (something attorneys like to do), foreclosure is a much more public process than eviction.

  13. 13
    AMS says:

    RE: Dawn Glover @ 10 – I recommend negotiating with your landlord regarding the painting of the rooms. Here is my basic strategy: Suggest that you will pay an amount today to have the walls repainted in the future, so if the new colors are not acceptable, the landlord has the funds to simply repaint the walls. With that payment you get permission to repaint the walls a new color. On average if you would have purchased in 2007 and sold in 2009 you’d have taken a much bigger loss. The trick, in this case, is getting the value of the repainting right. New paint adds future value, so you wouldn’t want to pay at 100%, but dark colors may be difficult to cover.

    Essentially you want to present the case that you are trying to maintain a happy home for your family while taking good care of the landlord. Clearly there is at least one landlord who understands market conditions, maintenance, and so on.

    Obviously it will not be possible to agree in all situations.

    “I’m guessing that the sales tactic of trying to make the customer feel like a loser has worked in the past…interesting. ”

    I am shifting gears from hard finance to psychological forces. The basis of my new direction is to better understand the desire to own. This is a funny thing, as if you wanted a moving truck, most people would suggest renting, or hiring the work done. There are some who would go buy a truck, and some that would stuff the crap in some small vehicle, or move it by hand, but that is not the majority. For some reason this is clear: Just rent a truck. Oh, and in the case you want to suggest issues of duration, there are some businesses that lease/rent large trucks for long periods of time. There are many more examples.

    When it comes to real estate, there is a certain suggestion that ownership is always a dominant strategy, no matter market conditions, your life condition, and so on. This gets directly to the claim regarding the sales tactic of trying to make the customer feel like a loser. What psychology, or traits, does the customer have for this to work?

  14. 14
    AMS says:

    RE: Kary L. Krismer @ 12 – This gets right back to the basics.

    The formula for a happy home is often rooted in the following truth:

    Income > expenses

    If the above inequality is true, chance of having a happy home is higher, notwithstanding the rent versus buy discussion. Computing expenses is another topic. The discussion about cash flow and expense is quick to follow.

  15. 15

    RE: AMS @ 14 – There’s probably two solutions to the situation where the equation is true. Enough money and happy children. Too much money and possible spoiled children.

  16. 16
    EconE says:

    RE: Dawn Glover @ 10

    F*** Ardell and her attitude. She should show a little more intellectual honesty after losing her own house to foreclosure not too long ago.

  17. 17
    Dawn Glover says:

    I was trying to be sarcastic about the paint, it’s really not relavant to Buy VS Rent in my opinion.

  18. 18

    RE: EconE @ 16 – I think she may have found a buyer, but I don’t recall for sure, and it’s not important enough to look up.

  19. 19

    RE: Trigger @ 5

    Is the Recession Over?

    A great cartoon by David Horsey….check it out :-)

    http://www.seattlepi.com/horsey/viewbydate.asp?id=2023

  20. 20

    RE: Dawn Glover @ 10
    It’s true that you can almost never get a real estate agent to declare ” DON’T BUY A HOUSE!”.
    Even I, the most anti real estate real estate agent out there, won’t quite say that.
    However, that’s world’s apart from declaring that it’s a good time to buy. Sure, it’s a good time to buy if you’re extremely wealthy and just don’t care if the value of your home plummets substantially.
    But from a pragmatic standpoint, at this time it still makes a lot more financial sense in the Seattle area to rent rather than buy.
    Still, people have different reasons for wanting to own their own home, and I’m not going to say whether those are good reasons or not. It’s a very personal decision. I own a home. I’m happy that I’m a homeowner. But I’m not a better person than anybody else because I’ve made that choice. I’ve got relatives in New York who are far wealthier than I, and have been lifelong renters.

  21. 21
    David Losh says:

    Rain City Guide has always seemed to me very dangerous for consumers.

    There’s nothing there except a plea for you, the consumer, to buy a service. Get a mortgage, get an attorney, pick an escrow, or Real Estate agent. There is a lot of fear mongering that goes along with that.

    The exchange with Dawn is a classic set of sales technique being used against Dawn’s logical conclusions. There’s a good dose of emotion from call me grand ma to life seen through the tears of the children.

  22. 22
    Scotsman says:

    RE: EconE @ 16

    Exactly. If Ardell had rented instead of buying more house than she could afford she wouldn’t have been foreclosed on. She would probably be an interesting person to sit and talk with, but as far as real estate goes she’s a one trick pony. Buy, buy, buy! I only wonder if she ever actually said “buy now, or be priced out forever.”

  23. 23
    AMS says:

    RE: Dawn Glover @ 17 – It’s quite relevant, as that is a difference between renting and buying. If you buy, then you can repaint the walls at any time for any or no reason. This is not the same under most rental situations.

    That said, there are plenty of people who don’t care about changing the wall colors.

  24. 24
    AMS says:

    RE: Kary L. Krismer @ 18 – How long would it take to look up? Ardell doesn’t command much of your attention! lol

  25. 25

    By Ira Sacharoff @ 20:

    RE: Dawn Glover @ 10
    It’s true that you can almost never get a real estate agent to declare ” DON’T BUY A HOUSE!”. .

    I came really close to that this last month, and I felt bad about it afterward, thinking I’d maybe gone a bit too far. The house had too much freeway noise, IMHO, but that sort of thing should really be the buyers’ decision. We can warn them of issues, but we shouldn’t try to control their decisions. So I would say we should never tell them not to buy a house, but we can point out the negatives.

  26. 26

    By AMS @ 23:

    RE: That said, there are plenty of people who don’t care about changing the wall colors.

    But there are other people who would never be part of a HOA because they want complete control over the color of the exterior of their house.

  27. 27
    ARDELL says:

    Interesting story, I really. I sold it short. I submitted an offer in 2008 and WAMU turned it down. A year later the same buyer offered $150,000 less and they approved it. Odd, but true. When I submitted the offer in 2008 I was not behind in my payments. I had to be behind in the payments and on the Trustee Sale list before they would consider the offer, by then they got $150,000 less plus the missed payments. So they lost $200,000 by rejecting the 2008 offer offhand. Go figure.

  28. 28
    Lake Hills Renter says:

    By softwarengineer @ 2:

    Avatar is out this weekend, a billion dollar production….probably worth seeing

    I saw the IMAX 3D showing today at Lincoln Square, and all I can says is WOW! That’s a fantastic movie to see in 3D!

  29. 29
    AMS says:

    RE: Kary L. Krismer @ 26 – Every time I read about one of those FCC versus homeowner association lawsuits regarding satellite dishes I cannot help but smile. Similarly with the Veteran who displayed the flag on his pole that was too large.

  30. 30
    AMS says:

    RE: ARDELL @ 27 – Selling $150k short is considered “interesting?”

    “So they lost $200,000 by rejecting the 2008 offer offhand.”

    $200k in loses for everyone else…

    I don’t think you purchased to cause such great losses, so I will classify this as evidence that many agents didn’t lie, they were just parroting falsehoods.

  31. 31
  32. 32
    b says:

    Ardell –

    Was the home you screwed your lender into taking a $200k loss on the home you lived in, your principal residence for you and your family? If so it is curious why you slammed Dawn over at RCG for thinking about buying a home in such terrible terms, after all a home is not an investment right (unless it is yours?).

  33. 33

    RE: Kary L. Krismer @ 25
    Oh, I’ve talked clients out of making offers quite a few times ( great strategy, huh?), when it struck me that it didn’t seem to match at all what they were looking for, so I have said ” Don’t buy THIS house!”, but not ” Don’t buy A house!”

  34. 34

    By ARDELL @ 27:

    Interesting story, I really. I sold it short. I submitted an offer in 2008 and WAMU turned it down. A year later the same buyer offered $150,000 less and they approved it. Odd, but true. When I submitted the offer in 2008 I was not behind in my payments. I had to be behind in the payments and on the Trustee Sale list before they would consider the offer, by then they got $150,000 less plus the missed payments. So they lost $200,000 by rejecting the 2008 offer offhand. Go figure.

    Well there are at least two possible explanations for that (beside the not being behind on your payment issue).

    1. You were dealing with a different entity the second year–WAMU is no longer WAMU.
    2. Banks are getting better at dealing with short sales.

    I’d guess the former, since banks move at glacial speed.

    I’m looking forward to seeing how this new Obama short sale system works. I think it might work fairly well for houses with only one mortgage.

  35. 35
    David Losh says:

    I’ve told people many times over the past 25 years not to buy a house. Many, many times people think they want to “own” a home without thinking it through. An attorney who I work with from time to time is the perfect example, He’s never home. He travels, is a political animal, socializes, and is growing his business. He owned a condo we just barely got him out of in time. He’s not a home owner.

    Of course I’m a lousy Real Estate agent, but there are plenty of really great agents out there. Most good agents have clients they don’t work with as either buyers or sellers. People who shouldn’t own a home is an industry topic among Real Estate agents.

    Now Real Estate sales people are a whole different topic. In my opinion that’s the point of confusion for most people. There is a Mike Ferry Sales Training mentality that has permeated the Real Estate Industry in the last ten years. Mike and his sons have been around forever, but no one of credibility paid him much attention. I was surprised to find he is still selling his coaching blather, but he has a strong following.

  36. 36

    RE: David Losh @ 35
    Maybe you’re not a slick salesman, David, but you do have a quality that a lot of real estate agents don’t have: Honesty. It’s a rare commodity. There are a lot of agents out there who have closed a lot of deals. There are a lot of agents out there who look successful. But I’m not sure that there are a lot honest agents out there.

  37. 37
    AMS says:

    RE: b @ 32 – Starting with $200,000, she could have rented a $1,500 place for over 11 years, without even considering the interest. At 5% interest, $833 per month forever, and had $200,000 at the end. And the term is “interesting” as the losses go higher.

  38. 38
    David Losh says:

    There are a lot of extremely honest agents out there who close a lot of deals.

    In the Seattle area at one time I counted maybe twenty agents who could get a deal done. I increased that to about a hundred a few years ago because there are a lot of really good young people who are interested in the business.

    Here’s what no says, like yourself, your money is in you property. The sale is secondary, or cash flow, or a favor for a friend. Your income is your property and ability to manipulate the Real Estate market.

    Many agents come to the business from long careers of working a job, or having a spouse who works a job, and investing in Real Estate. Real Estate is a business, It’s a multi billion dollar Industry. People make billions of dollars world wide every day, from Real Estate. The 6% commission is a …..

  39. 39
    AMS says:

    RE: David Losh @ 38 – I know we avoided each other for the last couple of weeks. I post this only for fun!

    “Real Estate is a business, It’s a multi billion dollar Industry. People make billions of dollars world wide every day, from Real Estate.”

    After a little “search and replace…”

    “Prostitution is a business, It’s a multi billion dollar Industry. People make billions of dollars world wide every day, from Prostitution.”

  40. 40
    David Losh says:

    RE: AMS @ 39

    That’s not true, the phrase is actually pornography is a multi billion dollar industry.

  41. 41
    AMS says:

    RE: David Losh @ 40 – How much money is made in the prostitution industry? Also I wonder, if I selected the correct real estate agent, to minimize any difference, what’s the difference between a prostitute and that real estate agent?

  42. 42

    “what’s the difference between a prostitute and that real estate agent? ”

    Ummm, you feel less dirty after dealing with a prostitute?

  43. 43
    David Losh says:

    RE: AMS @ 41

    The internet changed the relationship of prostitution to pornography. Pornography is legal, protected by the Constitution, prostitution is illegal, go figure.

  44. 44
    AMS says:

    RE: David Losh @ 43 – Prostitution is legal in many areas, including some real estate transactions–oh, maybe that’s called rape. Also, are you suggesting that the real estate agent that I selected is doing nothing illegal?

  45. 45
    ARDELL says:

    My children are grown, b. I sold the house when my last one left the nest to get married and start her own family. Yes, I bought it in large part for her. In fact she is the one who chose it.

    I primarily purchased it as an office space, as the mortgage was equal to the rent I was paying in Downtown Kirkland for the office. Traded the commercial space for a place where I could both live and work. In the rent vs buy discussion I had with Dawn, yes, obviously I could write off the interest and taxes on the house and not on the rent for the commercial space. Huge advantage. Made sense for me all the way around, as it decreased my monthly costs dramatically being able to both live and work in the same space.

    I was greatly surprised when the loan was approved. Frankly I did not expect that to happen because guidelines for mortgages generally require a two year history of earnings, and I had not been in Seattle for two years in Sept. of 2005 when I purchased it. For me it made great sense, not just because it decreased my monthly to buy it, but because I made a substantial amount in commission. So I received $34,000 in commission at time of purchase, and spent not a dime buying it (except for the home inspection and appraisal cost.)

    To this day I am more than happy to make up the difference between the first offer I brought them in 2008 and what I borrowed. But I don’t think I should have to pay for their error of rejecting that offer, or their error of accepting the offer one year later (from the same buyer) without countering that offer. I don’t see the purchase or sale as a “mistake”. It made great sense for me and mine and served us very well. The $200,000 difference between the offer I brought them and the one they eventually took (from the same buyer) is their mistake and I see no reason why I should pay for theirs. That’s how I see it. Your thoughts may vary.

  46. 46
    Scotsman says:

    “We can’t afford your treasuries because you aren’t buying our exports?”

    http://www.shanghaidaily.com/article/print.asp?id=423054

  47. 47
    ARDELL says:

    P.S. to my comment #45 I said: “…obviously I could write off the interest and taxes on the house and not on the rent for the commercial space.” Sorry, that isn’t obvious. I was the one paying the rent and carrying costs on the office space, but I was not the one who signed the lease to rent it. So buying the house and leaving the office space was the best alternative to that situation. If I were a signer on the lease I could have deducted the expense either way.

  48. 48
    AMS says:

    RE: ARDELL @ 45 – “Traded the commercial space for a place where I could both live and work. In the rent vs buy discussion I had with Dawn, yes, obviously I could write off the interest and taxes on the house and not on the rent for the commercial space. Huge advantage.”

    100% of the expenses at a commercial location are tax deductible if it’s business related, and that’s in addition to the standard deduction.

    Notwithstanding, looking back, was it really a “huge advantage?”

    “To this day I am more than happy to make up the difference between the first offer I brought them in 2008 and what I borrowed. But I don’t think I should have to pay for their error of rejecting that offer, or their error of accepting the offer one year later (from the same buyer) without countering that offer.”

    It’s too bad that you didn’t just bring the difference to the table. That said, I do appreciate your position that losses should be mitigated. Essentially you are suggesting that losses were not mitigated. As you are probably well-aware, it’s often difficult for a lender to assess if the offer is too low. Part of the problem is that if prices would have gone up, the lender would minimize the loss by not accepting the low offer.

    This reminds me of the situation with automobiles. I know a guy who had an offer to buy his car, but it was $1,000 less than he owed, and the lender had to admit the loan was not fully secured (i.e. the true market value was less than loan value). The lender was not willing to work with him, so the car is repossessed, and sold at auction for far less. Thus there are all kinds of fees and lower sales revenue. Should the amount he owes be limited to the $1,000, or should he be held responsible for the several thousand? The big difference here is that most cars go down in value, so the lender should anticipate this situation.

  49. 49
    ARDELL says:

    AMS comment #37

    True…but I started with zero investment and an initial $34,000 cash in my hand return from the getgo.

  50. 50
    AMS says:

    RE: ARDELL @ 49 – I play this game with small children.

    The following offer is made:

    1. One piece of candy right now.
    2. Two pieces of candy after dinner (about 2 hours later).

    Thus I am offering a 100% if the child will loan me the one piece of candy for a couple of hours. I will then pay the candy back with two pieces. Almost all children want one piece right away, rather than two pieces a couple hours later. 100% return on two hours time is clearly a very high rate of return!

    What would happen with most adults:

    1. 100% pay today
    2. 200% tomorrow

    I hope we can agree that almost all would wait a day, which is 12 times longer than the 2 hour wait.

    (I should note, however, that the average child might be pricing the risk of default. If the child thinks I will default at a very high rate, then the best play might be one piece immediately. I always have followed through with the deal–my historic default rate on this offer is ZERO.)

  51. 51
    ARDELL says:

    AMS #48

    Sorry, I noticed that piece of missing info after I posted the comment. Since the lease on the business space was not signed by me, it created that problem of not deductible by me. My earnings were used to pay for the space, but I could not deduct it. There was a way around it if I gave all of my earnings to the people who signed the lease, which was their expectation, but I wasn’t willing to do that for obvious reasons. Long story short, I was better served by buying the house and moving myself out of that office space.

    As to the rest of the calculation, remember that I paid a premium for risk. The 1st would have been covered by the first offer I brought them. The second was charging me 9% when the going rate was 5%. So I would first deduct the 4% premium I paid for 3 years, from the loss, as I paid that because of the risk of loss.

    Have to run to an appointment so can’t complete the math. But when the 2nd charges double interest due to “risk factors”, then what the borrow pays for “risk” should be deducted from the loss…no?

  52. 52
    AMS says:

    RE: ARDELL @ 47 – “I was the one paying the rent and carrying costs on the office space, but I was not the one who signed the lease to rent it. So buying the house and leaving the office space was the best alternative to that situation. If I were a signer on the lease I could have deducted the expense either way.”

    Um, I don’t know who is giving you tax advice. I am not going to suggest that your tax professional is wrong, just as I don’t question medical professionals. I do, however, recommend second opinions. I also note that are plenty of verbal contracts…

  53. 53
    AMS says:

    RE: ARDELL @ 51 – This is what I am questioning:

    “My earnings were used to pay for the space, but I could not deduct it.”

    Why was your business rent expense not deductible?

  54. 54
    AMS says:

    RE: ARDELL @ 51 – “As to the rest of the calculation, remember that I paid a premium for risk. The 1st would have been covered by the first offer I brought them. The second was charging me 9% when the going rate was 5%. So I would first deduct the 4% premium I paid for 3 years, from the loss, as I paid that because of the risk of loss.

    Have to run to an appointment so can’t complete the math. But when the 2nd charges double interest due to “risk factors”, then what the borrow pays for “risk” should be deducted from the loss…no? ”

    Assuming your claims are correct regarding the risk premium, what do you think the risk premium covers? Is it your position that the risk premium is an insurance policy that should cover any loss that you suggest OR is it your position that the risk premium computed on an actuarial basis? (I am open to many other possibilities, but these two seem to be reasonable to start with).

    When you buy insurance, you pay a premium to shift certain risk from you to another party, the insurance company. If a loss happens, you don’t get your premium back. If a loss does not happen, you don’t get your premium back.

    I might go a different direction. You want to take the 9% rate and suggest that “the going rate was 5%.” Looking backwards, maybe the 9% rate you were charged was too low, so you should pay an extra 6% to make up for their mispricing of the actual risk? In other words, maybe the right price was 15%, so you paid far too little?

    (I have made some assumptions here to move the conversation forward. The person who was pricing the risk was the lender, so an underlying question remains, should a lender just write off massive losses because the lender priced the risk a percent or two higher? There are going to be some borrowers who fully pay back the loans, and these borrowers don’t get any discounts, return of interest paid, and so on. There are going to be some borrowers that default. Should these borrowers get any discounts, return of interest paid, or anything else based on the default?)

  55. 55
    ARDELL says:

    AMS,

    As I said, long story. Short version: I was not one of the original owners, and so the business expenses were not deductible by me. That could have been corrected as you suggest, but one of the owners did not want me to be one of the owners (because they were men and I was a woman) but DID want me to give “the men’ all of my earnings to cover all of the expenses of the business. Odd, but true. Cultural differences, I think :) Consequently buying the house as my office and home, and removing myself from the office space, was a good deal for me and the easiest route for me to take at the time. As I said, I really didn’t expect the mortgage on the house to go through, as I met none of the normal criteria. But it did, which surprised me as much as anyone.

    Really have to run but came back, not to say the above, but to bring up a point about losses that rarely gets raised.

    Mortgage Insurance. The top 20% of any given mortgage is usually and historically covered by mortgage insurance.

    If someone has paid mortgage insurance on the difference between 20% down and the down payment (in this case zero) do you feel the insurance company paying the loss is wrong? If you have health insurance and pay in $2,000 and have a $100,000 operation covered by that insurance, do you feel you owe the $98,000 difference between what you paid to the insurance company and what they paid for the operation? I think not.

    “sub-prime” financing was the lender choosing to be self insured, via higher interest rate, vs asking the borrower to pay PMI or MIP mortgage insurance. They chose higher interest rate, and they chose to be “self-insured” vs. paying the insurance company. That was their business decision. So why should the borrower pay for their decision to not want outside insurance vs higher rate to self-insure?

    Most miss that point. 5% down today requires mortgage insurance. 5% down up to 2003 required mortgage insurance to be paid by the borrower. The reason the banks took the losses for 2003 to 2007 is because they opted for high interest rate seconds INSTEAD of mortgage insurance…their bad business decision and their loss as a result…no?

  56. 56
    ARDELL says:

    Wonderful discussion AMS. I will check back when I return and continue the discussion. Sorry I have to leave in the middle like this.

  57. 57
    AMS says:

    RE: ARDELL @ 55 – “If you have health insurance and pay in $2,000 and have a $100,000 operation covered by that insurance, do you feel you owe the $98,000 difference between what you paid to the insurance company and what they paid for the operation? I think not.”

    Part of the problem with the “$100,000 operation” is that the number is fixed. You are taking fixed losses and trying to tie it back to the premium.

    How about this: You have 4 children. According to the experts, on average one will need a $100,000 operation. How much do you charge each one?

    What if the $100,000 operation turns out to be $125,000 (a possibility you exclude by bounding the loss from above)?

    What if all turn out to be healthy? What if two need the operation?

    (There is one more problem here: The insurance coverage that you think you have might not be the actual coverage…)

  58. 58

    Assuming a written agreement is necessary for a deduction, I have a hard time believing some sort of contract couldn’t be drafted that allowed you occupancy of the space in return for a certain payment, perhaps on a month to month basis.

    Also, the rent as a business expense would not be subject to the standard deduction, and so even assuming the amounts were the same, you’d be better off paying rent (not to mention the fact that whatever contract you had for rent probably wouldn’t have had a six figure legal obligation attached to it).

  59. 59
    ARDELL says:

    Kary…I think you missed something there. I had no contract to rent. I was not party to the contract to rent. I was simply the only one with enough money to pay it. That put me in the position of paying it without being able to deduct it. Not a good scenario.

  60. 60
    ARDELL says:

    AMS,

    You lost me there. You pay for insurance without knowing if you will ever need it. By the time you need the insurance, the insurer does not get to say “no fair, you took out more than you paid in”. That in essence is the missing piece of this puzzle.

    If the bank decided to be self insured via higher interest rate, vs. 5% plus PMI, then that was their business decision to be self insured. If the borrower had paid 5% plus PMI then there would be no question on a 10% loss that the PMI would cover it. The bank would not lose nor would the borrower. Until 2003 that was the basis for all mortgages with less than 20% down.

    If the bank said we would rather have 9% interest than be insured on the top 20% of value, they in essence opted to be self-insured in exchange for more money each month. Why should the borrower be in any different position if there was PMI vs the bank being “self insured”. At minimum the amount paid in extra interest should be deducted from the loss, is my thinking.

  61. 61
    Scotsman says:

    Now the banks are “strategically defaulting?” Heh.

    http://market-ticker.org/archives/1749-The-Last-Word-On-Strategic-Defaults.html

  62. 62
    AMS says:

    RE: ARDELL @ 60 – There are times when the unexpected event happens. Nassim Taleb wrote a couple of books on this topic. This has happened time and time again. The unexpected event was falling property values. It was unexpected by both parties.

    We do not know why your rate was 9%. I understand that you claim it should have been lower, but what if I suggest that 9% was too low. You seem to be avoiding that possibility.

    As far as PMI versus “self insured,” do you think that would have changed your situation one bit? The sale would have been just as short. Also you make this statement, “The bank would not lose nor would the borrower.” The PMI only covers the lender. PMI does not cover the borrower. Furthermore there are limits to coverage, and the total market values in Vegas are well-beyond the PMI coverage limits.

    Claim: “You pay for insurance without knowing if you will ever need it.”
    Claim: “At minimum the amount paid in extra interest should be deducted from the loss, is my thinking.”

    Please note that if you take the position that the higher rate was some form of insurance (it’s really a risk premium, but this begs the question as to what is insurance.), then you would never expect that premium back. As you said, “You pay without knowing if you will ever need it.” Also the premium is earned.

    The ultimate problem is not the total loss related to default was not accurately computed. An insurance company must pay even if the loss was more than expected. In this case, since you don’t have sufficient resources to cover the loss, the lender will be the one to take the loss.

  63. 63
    AMS says:

    RE: ARDELL @ 59 – Either you received some benefit or you did not.

    If you didn’t receive any benefit, then you loan someone the cash. Maybe you gave someone cash. If you received some benefit, then you must have had some contract, even if it was verbal.

  64. 64
    ARDELL says:

    AMS – agree.

  65. 65

    By ARDELL @ 59:

    Kary…I think you missed something there. I had no contract to rent. I was not party to the contract to rent. I was simply the only one with enough money to pay it. That put me in the position of paying it without being able to deduct it. Not a good scenario.

    I understood that. I was saying though that you could have created a contract of some sort. I assume you were getting some benefit out of paying the money, like partial possession of the premises. That could have been documented. Presumably the money wasn’t being paid as a gift, and it was related to your business.

  66. 66
    AMS says:

    RE: Kary L. Krismer @ 65 – We both know there was some contract, but sorting out exactly what the terms actually were might be a problem at this point…

    I am not sure if she paid rent, loaned money, or gave a gift. Wonder what records exist relative to the payments?

    I wonder how much is present in terms of double entry books with memos and supporting documentation.

  67. 67
    Ray Pepper says:

    RE: b @ 32

    Just a comment………

    “Ardell –

    Was the home you screwed your lender into taking a $200k loss on the home you lived in, your principal residence for you and your family? ”

    See this is where I differ in opinion from so many people.

    Someone buys…Cannot afford anymore for ANY reason….Per note the collateral goes back.

    END OF STORY! That was the deal correct? — that millions of Americans engaged in?

    The banks took risks with the buyers. Some risks pay off , some do NOT. Never and I mean NEVER castrate the Buyer. A home purchase is always an investment. As in any investment if it sours it must go away or it will continue to cause further destruction.

    I support the millions of families who walk and those that continue to pay. Judging peoples financial decisions has NOTHING to do with integrity or morality. It has everything to do with a familes given financial position at a moment in time. Live your life everyone and listen to commonsense and do your due diligence by knowing the ramifications of your decisions.

    When I hear short sale and foreclosure the first thing I think of is the person was/is buried and they made a decision to move on with their lives. Its the millions of homeowners that are suffering each month trying to maintain their obligations that destroys families. Just yesterday I met a couple who has been paying 1155.00 per month extra to keep their home in Az rented because they couldn’t sell it. They wanted to maintain the payments and their good credit. They have done this for 19 months and now the husband has lost his job in Renton last week. “Ray, we could have saved all that money if we just did what our neighbors all did and walked…Now we have very little in savings and the God Damn home is going to be foreclosed on anyway.”

    These stories sicken me and these homeowners need to be educated about the TRUTH!

    Ardell Good For You and Never justify the decision you made! It is your life and YOU MADE THE RIGHT DECISION!

    All these God Damn homes are coming back and the sooner we help people understand the sooner we can move on with our lives……..Less then 5% of people getting Loan Mods. I say Bull Shit………

  68. 68
    Scotsman says:

    RE: Ray Pepper @ 67

    Read the link I posted at #61. If the banks are doing it to each other and the government, why are individual actions seen differently? Those who claim loans are made on trust forget the old days where lending was collateral based- the house and the down payment. And lenders wanted the loan paid back, not just sold off to an outside entity at a quick profit. By breaking the connection between the lender and the borrower and how they share in the consequences of both successful and failed transactions the banks brought this on themselves.

  69. 69
    Ray Pepper says:

    RE: Scotsman @ 68

    I’m 1/2 asleep Scotsman. just came from the 500 Realty Xmas party and ugggh..too much crappy food..I didn’t even read the entire thread , just enough to see a person (Ardell) explaining why they shortsaled their property or foreclosed on it. That was enough to get me going. Day in and day out people continue to make horrendous financial decisions based on fear and lack of education. It disgusts me. I will read your link tomorrow.

    Actually I just read it!!! EXACTLY and spot on!

    “Strategic Default, in today’s economic, legal and ethical environment, is perfectly within the rights of consumers and they should exercise that right when it makes economic sense, after consultation with both legal and accounting professionals.”

    BINGO !! EXCELLENT EXCELLENT LINK!

  70. 70
    Trigger says:

    Scotsman and Sniglet – If you look at the US debt:
    http://en.wikipedia.org/wiki/United_States_public_debt
    you will see this is not a biggie. I mean it is going up and it looks possibly worrisome. But it is less than 80% of GDP. Now let’s assume that it is even 100% of GDP. Then it still would not be the end of the world.

    To service a 100% GDP debt you need 5% of GDP every year just to service. So it is a burden on growth for sure. But it does not wipe it out completely…..

    If debt becomes 200-300% of GDP it potentially becomes unsustainable and then it is better to try to jump the ship because it might sink. But for now I think relaxation is the name of the game.

    I just see the situation in the US as semi serious. You need to take care of it. But for now it is good times. And there will be plenty of options to start inflation etc.

  71. 71
    Trigger says:

    I also cannot see that the current level of debt is enough to start a depression. It is bad but there is a difference between say 70% debt and 300% debt. Maybe I am mistaken but it looks like we have many years of good times ahead.

  72. 72

    RE: AMS @ 66 – Whatever it was it hardly seems like a reason to go out and buy an expensive house. Some change was probably in order, but I just don’t see buying a house as a solution, or at least the justification that the payments were the same isn’t a very good justification.

    It is a nice distraction though for getting away from the validity of her predictions. Let’s accept the fact that she had a reason to buy in 2005–why didn’t she put the property on the market in May of 2007 and sell in June 2007? If you can see the future, that would be a no-brainer, right! ;-)

  73. 73
    David Losh says:

    RE: Trigger @ 71

    You’re very correct that the debt is really not a big deal especially when you factor in our military spending. No other economy has the amount of waste and fraud that our military budget does. I can not figure out why military spending gets this free pass on pork.

  74. 74
    AMS says:

    RE: Kary L. Krismer @ 72 – In the end, I think we can sum it up this way; the options discussed:

    1. Continue as is- Pay someone some amount of money each month.

    2. Buy a home- Get $34,000 today, but put yourself in a bad position.

    Another option:

    3. Exit from the rent situation, and if the reason for renting isn’t good enough, exit. I have no inside information, but I suspect income < expenses.

  75. 75
    AMS says:

    RE: Trigger @ 71 – I am not sure that low levels of debt is a good predictor of future economic times. Clearly high levels of debt is a good indicator of problems.

  76. 76

    RE: AMS @ 74 – I’d never really thought about the possibility of an agent doing 0% down and getting a commission. There really should be a requirement that an agent put at least as much down as what they get in commission. Otherwise there’s too much possibility of abuse.

  77. 77
    Trigger says:

    RE: AMS @ 75 – Right. So the fact that the debt is the way it is does not mean we are heading for a catastrophe. And look at the impressive military spending. It ensures the US is really on top. Great technologies come out of military spending like the internet. So if they want they can curb military spending just a bit and everything will be ok. I really cannot see the depression we were supposed to have. The debt right now does not justify a depression.

  78. 78
    AMS says:

    RE: Trigger @ 77 – Historically, the more a society spends on the military the faster it falls.

  79. 79
    AMS says:

    RE: Kary L. Krismer @ 76 – I suppose you are suggesting that an agent could run a string of 0% purchases, gain the commissions, and then suffer later?

  80. 80

    RE: AMS @ 79 – Well generally lenders are very interested in their borrower getting money back from the transaction, and don’t like it! There have been a lot of questions, for example, as to why they allow rebate commissions, where that isn’t part of the down payment. It’s an exception to the rule. But yes, in general where the buyer is getting something back there’s the potential for abuse.

  81. 81
    AMS says:

    RE: Kary L. Krismer @ 80 – In a market where prices are flat to increasing, the losses wouldn’t be that massive. 100% financing in a down market is a deadly prescription. Also as agents get desperate for income, any income, the attractiveness of buying a 0% down home where you get $34,000 in income increases. The only thing that would make this even better is if the government would pay the agent an extra $6,500 or $8,000.

  82. 82
    David Losh says:

    The thing about the Real Estate commission is a big part of what used to be my business plan.

    My license for years has been at low desk fee 100% commission offices. Other people, another person than I, would buy a house through me. I might even list a house and resell it with a 4% commission.

    We would then take the money from the commission to contract work to the property for resale. I would get the commission on the sale. It worked well. I eneded up buying the properties myself for resale.

    Of course now, in my opinion, the Real Estate market is all messed up.

  83. 83
    David Losh says:

    RE: Trigger @ 77

    If the government would even address the military budget, get rid of waste, arm the troops, lose some programs, or redirect programs to profitable enterprise, we could make a big dent in the debt.

  84. 84
    Trigger says:

    RE: David Losh @ 83 – I agree. I think the US is really far from screwed. Everybody is just saying. Mama mia – depression, deflation. The govt cannot do anything about it. We can only wait and die.

  85. 85
    Trigger says:

    The other thing is to reverse the not so smart immigration policies. They put in lots of whacko immigration policies that do not deter illegal people but they are very effective against people who start companies, who go to good universities, have good education etc.

    The US was very effective in doing the brain drain from all around the world. So smart people did not produce anything substantial in Mexico – instead they did that in the US. Mexico would probably say – what a shame to do the brain drain etc. But this is just global competition. The US never forced any talented people to stay in the US.

    I remember times when universities such as Princeton would win a Nobel prize every year. Many times thanks to talented people from abroad who really worked hard to make all kinds of things happen. These people do not come as much to the US because of finger printing, because of rude interviews at US embassies, whacko rules and policies like your wife is barred from coming to the US for 5 years even if she just wants to cook for you etc. Lots of patents are filed by foreigners living here in the US. I really think that Bush policies discouraging such people from coming here should be scrapped. The country became so great because of freedom and I would really play this card. Countries such as China offer no freedom. If you are a reasonable person even if you have lots of money then you should still be contemplating moving to the US because the regime over there will not allow you to spread your wings.

    So pro business policies, freedom could help a lot in getting the country out of the mess. And also taxation should be key. Definitely no VAT tax like the one that is in Europe and screws the whole continent over there. Let people themselves drag the country out of the mess through hard work.

  86. 86
    AMS says:

    RE: Trigger @ 84 – There is a lot of space between good times and depression. Even if the US remains above depression, that does not make good times.

    Michigan is near 15% unemployment (U-3). I’m not sure, is that a depression level? Certainly it’s not good.

  87. 87
    Trigger says:

    RE: AMS @ 78 – Most importantly whacko policies, poor leadership and some classes of people that are minding only their own interests are to blame….. Like the unions who don’t care about the future of the companies but care a lot about the present workers etc……

    The world is a dangerous place. You have lots of whacko regimes that do not care about the world but care for themselves only – so they are unpredictable. How can you just get rid of military and disarm when you have countries like North Korea on a rampage? I mean this would be silly. You need some military spending although it could be adjusted lower to make sure that the debt is handled well. But really you have a world that is still dangerous. Maybe not as dangerous as 25 years ago but still a dangerous place. So precautions are a good thing. Normally I would love the world to be a loving place where everybody hugs and kisses but this is not the world that we have right now. Maybe in 100 years time it will be like this – but this should not matter to anybody reading this thread….

  88. 88
    AMS says:

    RE: Trigger @ 87 – Are you suggesting Obama is ‘whacko?’ Maybe I’ve been around too many people that compare him to Hitler. Many people compared W to Hitler too.

  89. 89
    Trigger says:

    RE: AMS @ 88 – No. I don’t think Obama is a whacko. But I do think that many Bush policies were simply harmful and not productive. If you have bad policies for a very long time – you are right – you start getting that sinking feeling……

    Obama for me simply has no track record and I am a bit afraid of his socialist tendencies. But he is still promising and he certainly is not a whacko at least to me.

    So the perspective for me is that Obama is promising but certainly has no track record and did not deserve any Nobel prize.

  90. 90
    Scotsman says:

    RE: Trigger @ 70

    No, debt at 100% of GDP is a killer. If we assume your interest rate of 5%, which is a bit low but not bad for a historical average, and annual GDP growth of about 3%- again, a pretty good historical average, you should be able to see what the problem is. At those rates growth doesn’t even cover the interest, so the interest deficit has to be paid out of national assets or savings. Comes year two and the debt is even higher but the growth or production is even lower- because we stole from savings and investment the prior year to make up the short fall. Under the circumstances you describe we would have expenses going up and income headed down, both at exponentially growing rates. Certain death.

    You know the old trick of putting a penny on day one of a calender, then doubling it to two pennies on day two, four on day three, etc? End of week one: a little over a dollar cumulative. End of week two: About $160 End of week three: just under $20,000. End of week four? Over a million dollars. Compound interest, or compound (exponential) growth or shrinkage in expenses or revenue hits very hard after a period of seemingly little activity. This country is very close to the tipping point where expenses explode and overwhelm our ability to ever pay for them.

    Inflation is not a cure. It destroys the dollar and our ability to borrow. Given our current levels of manufacturing and real production it would severely reduce our standard of living as we became increasingly dependent on the rest of the world for much of what we consume. Think not quite third world, but closer than you would like.

    Time for less hiking and more reading.

  91. 91
    AMS says:

    RE: Scotsman @ 90 – “If we assume your interest rate of 5%, which is a bit low but not bad for a historical average, and annual GDP growth of about 3%- again, a pretty good historical average, you should be able to see what the problem is.”

    This is very similar to negative leverage in housing. With very little modification the statement reads, “If we assume your interest rate of 5%, which is a bit low but not bad for a historical average, and annual HPA of about 3%- again, a pretty good historical average, you should be able to see what the problem is.”

    I’ve also suggested that while the debt may or may not be excessive, much of the investment is poor. Thus we are financing poor investments. Financing investment that will yield high returns is a much better strategy, but right now we have an economy that is so starved for dollars that poor investment is viewed as a positive, at least for today. It reminds me of someone who received $34k, but the future losses were about $200k.

  92. 92
    AMS says:

    RE: Trigger @ 89 – Ok, you have suggested that you have a very positive outlook on the economic future. Rather than debate that outlook, let’s consider the risk of a failed assumption. What happens when someone takes that to be true, but things are not as expected.

  93. 93
    David Losh says:

    RE: Scotsman @ 90

    During this Christmas shopping season I’ve been thinking that consumer spending has been driving the economy. Then there is the issue that home building promotes consumer spending. GDP is driven by consumer spending and that’s over.

    The conclusion that I came up with is a boost in manufacturing. Tech bubble over, housing bubble over, stock market bubble about to burst, and I think that leaves us with American manufacturing.

    The way I’m seeing it today is that maybe, just maybe the commercial lending market may open up based on plant and equipment purchases. If I remember correctly we are one of the few, if not the only, government that allows other than domestic purchasing. I think we buy the green (actually they are black and red) berets for the military from China.

    If your beloved government would say that the Government Purchasing Office had to buy domestic, I think it starts inflating the manufacturing bubble. A second part is that Made In America is a trusted brand in Asia. I think, no matter what the tariff, we would have a market in China for American goods.

    So I’m bullish on the economy, bearish on housing.

    You are starting to shake my faith in Obama. He may not have the force needed to rally broad support.

  94. 94
    ARDELL says:

    #72…back to the children thing. My daughter is celebrating her first wedding anniversary today. By summer of 08 she was in her own place. In 07 her now husband was still in Iraq. As i said earlier and elsewhere…children first. You don’t market time around your children’s needs.

  95. 95
    AMS says:

    RE: ARDELL @ 94 – It appears that we can sum your strategy up as some sort of “children first.”

    As suggested in #14 “children first” is likely found in the following:

    expenses < income

    It does beg the question, I suppose, what is "children first?" I'm afraid that this could quickly become, "Whatever I desire with the excuse that I am putting my children first." You also present this as if there was no other alternative. I bet there was a better way to go, even using the "children first" strategy.

    In the end, it was a bad financial decision.

  96. 96
    OldGuy says:

    To: “The Tim”
    34,00 RE commission from one sale. (see post number 45)
    Dang, doesn’t that cause a conflict of interest on the advice from an RE agent?
    My question is: When a RE agent contacts a “buyer” on a blog (RCG, Seattle Bubble, etc.) and suggests “looking at” or “buying” a home, is the agent entitled to any portion of the commission?

  97. 97
    Scotsman says:

    RE: AMS @ 91

    ” It reminds me of someone who received $34k, but the future losses were about $200k. ”

    Bada- Bing, Bada-boom! Except for one small detail- Ardell didn’t take any real loss at all. She wouldn’t have gotten the commission if she didn’t buy the house, so that money really isn’t a factor. And she didn’t lose the $200K, the lenders did. In fact, she got a pretty sweet deal, she got to essentially “rent’ a house for the needed period of time, and unlike the rest of us (renters) she got to deduct the bulk of her “rent” (interest expense) from her taxes. In a sense, we- the rest of the tax payers, paid her rent. Since she is removed from the majority of the consequences, why not do it again? Heck, if I could find a lender and a government stupid enough to offer that kind of a deal these days I might even go for it. Who cares if your credit suffers for a few years- who wants to buy a house now anyway? But wait- we do have that government, and the banks prove their stupidity every day….

  98. 98
    Scotsman says:

    RE: David Losh @ 93

    Made in America- high quality and status. A government that supports it’s own. A solid, diversified manufacturing base. Therein lies the way out- but it takes decades from when the decision is made. And so far we really haven’t even started the conversation on a national level. Oh well…

  99. 99
    AMS says:

    RE: Scotsman @ 97 – You are correct.

    I am not sure how much the original sale was, but clearly it was a rather large transaction. I know she has made all kinds of claims:

    1. There was the $34,000 commission.
    2. There were the misogynistic men.
    3. There was the rent, loan, something.
    4. There was the income tax issue.
    5. There was a claim about best for the children.
    6. PMI should have covered the loss.
    7. The interest rate was too high.
    8. The lender should have taken the first short offer.
    9. There are claims about how this is ‘interesting.’
    10. I am sure I’ve missed something.

    This is just like an onion, the layers just keep coming.

    I did read the information you provided in #61 (yes, I clicked the link and read). By no means am I suggesting that Ardell did anything wrong, accidents do happen. But measuring the damage is another topic. Also trying to figure out how to avoid the accident in the future is probably found among those ten issues above.

  100. 100
    David Losh says:

    RE: Scotsman @ 98

    This goes directly to my statement about Obama. Let’s say OK, he did what he could for health care, his darling, but he didn’t. Then he tosses in 30K troops into Afghanistan without a game plan, nothing said, nothing done, nothing accomplished. Let’s leave the cars and home mortgages alone for a minute.

    All Obama would have to do to jump start the economy is to direct the Government Purchasing Office to start buying American. Where could he go wrong? How about directing some of this TARP money that seems to be coming back at manufacturing?

    It’s simple, goes to creating jobs, puts pride back into the American product and work force. It would probably pay for itself.

  101. 101
    AMS says:

    RE: David Losh @ 100 – You hit #100 once again!

  102. 102
    Hugh Dominic says:

    RE: AMS @ 95 – in the end, ardell made a bad financial decision, motivated by greed, and then passed the bill on to the rest of us.

    She took $34,000 in free money, and a house that she intended to pay for only if it appreciated. When the dollars going in stopped making sense, she defaulted.

    $200k or more in losses then passed on to the bank, which under today’s rules means the losses transferred to the American public. (tarp, fnma buyouts and guarantees, etc.)

    Ardell, I suppose it’s calming to create a set of rationalizations to push the blame onto the bank, but I don’t see how you can rationalize away your damage to the American taxpayer. Normally when a person does damage to the public, the result is jail time. But you could also write a check to the IRS to help. Let’s assume that you and wamu were equally at fault, so write the check for 50% please.

  103. 103
    AMS says:

    RE: Hugh Dominic @ 102 – You think she is 50% at fault? You must be male.

    All kidding aside, how many “owners” looked down at renters during the period of rapid housing price appreciation. Now these same people don’t like it when the rapid housing price appreciation has turned to depreciation.

    I do wonder what her attitude would have been if prices would have increased by 20%. Renters would have probably been considered a filthy untouchable class. Now it is somebody’s fault that these former ‘owners’ must rent today. Or those who have not been relegated to renting yet must complain about all the market losses. Clearly there has been a great injustice!

    The everlasting quest for the above average risk-free return continues…

  104. 104

    RE: Scotsman @ 97 – First, I’m not sure $200k is the total loss. Wasn’t that just the loss from the prior offer?

    Second, her loss is that she has a foreclosure on her record now. That will likely hurt going forward, but we won’t know how much until that point in time arrives because standards change over time.

    Third, taxpayers don’t pay the “rent.” She only gets a small part of the interest paid back in the form of less taxes. Most likely something far less than 30% after accounting for the standard deduction.

  105. 105

    RE: OldGuy @ 96 – I think you may have misunderstood. In post 45 the buyer was the agent. But to answer your last question, pretty much the only way an agent would get a commission on a sale is if they are the agent involved with the sale. The agent could convince someone to buy, but unless they go through the agent (at least on a referral basis), the agent won’t get a commission.

  106. 106

    RE: Hugh Dominic @ 102 – I could agree with a lot of that (blame of Ardell vs. blame of WAMU), especially since WAMU did go under, probably leaving the government to pick up a lot. But on the other hand, WAMU was doing some incredibly stupid loans. Perhaps the ultimate blame goes to the regulators.

  107. 107
    AMS says:

    RE: Kary L. Krismer @ 104 – Taxpayers pay the rent in the form of bailouts.

  108. 108
    zippygc says:

    Dec. 21 (Bloomberg) — The market for Treasury inflation protected securities is showing Federal Reserve Chairman Ben S. Bernanke won the battle with deflation, paving the way to start withdrawing cash pumped into the economy since 2007.

    The gap between yields on Treasuries and so-called TIPS due in 10 years, a measure of the outlook for consumer prices, closed above 2.25 percentage points four days last week, the longest stretch since August 2008. That’s the low end of the range in the five years before Lehman Brothers Holdings Inc. collapsed, and shows traders expect inflation, not deflation in coming months, said Jay Moskowitz, head of TIPS trading at CRT Capital Group LLC in Stamford, Connecticut.

    —————-
    RE looking more favorable in inflationary environment. Macro Deflation theory is all but dead.

  109. 109
    AMS says:

    RE: Kary L. Krismer @ 106 – There is plenty of blame to go around…

    By the way, I know who to blame for the identity theft situation. Well, I don’t really know the perpetrator, and the actual identity will probably never be known, but most people would agree the blame should be place on whoever it is that performed the illicit acts. What I notice is that the victim pays the price every day. The corporations, bill collectors that look to collect from the victim, don’t really care about the victim. They just want to profit. Yes, there are various remedies, and yes it takes a lot of time, postage costs, gathering documents, and so on. What does the victim get? Never will the time and effort get recovered. One reply that the victim received was basically we make it difficult on you to prove you are a victim, but you could quickly resolve this by simply paying the $75. Of course if you simply pay, it does not fully scrub the credit report. In this case, I am starting to blame those who make claims the victim owes and won’t take care of the problem expeditiously. Fortunately the major credit bureaus must block out information that is related to identity theft.

    In the Ardell case, there is only one party that will take it personally: Ardell. Yes, there are lots of WaMu shareholders that took losses, but Ardell had plenty of control over the situation. All those evil lenders, who required little to no documentation, made bad loans, and so on, are not personally affected the same way.

    Ardell got her $34,000 in candy, but it was at a high future cost. She and others have paid a high price.

    (Yes, as credit goes down in general, based on the economic times, this probably isn’t viewed as bad as it would have been four years ago.)

  110. 110
    Scotsman says:

    RE: zippygc @ 108

    No, they are not betting on inflation. They are betting on rising interest rates. There is a world of difference, and one does not necessarily beget the other. Interest rates will rise because of excess debt and a lack of new money to buy not only the roll over portion but the new issues. Housing prices will continue to fall as rates increase, costs increase, and financed purchases decrease. Macro deflation will continue. This isn’t simple, or easy to understand. But be warned, your assumptions about housing prices are dead wrong.

    Hit this link, then hit the first link in the topic. Then com back and read the rest of the topic comments.

    http://www.tickerforum.org/cgi-ticker/akcs-www?post=121942

  111. 111
    Scotsman says:

    RE: AMS @ 109

    P.S. Trusting ” Jay Moskowitz, head of TIPS trading at CRT Capital Group LLC in Stamford” to tell you if TIPs investing is a good idea is sort of like asking a used car salesman (or a Realtor) if today is a good time to buy. Use your head.

  112. 112
    AMS says:

    RE: Scotsman @ 111 – Huh?

    edit: oh, you meant to reply to zippygc @ 108

  113. 113
    Scotsman says:

    RE: Kary L. Krismer @ 104

    You’re correct in the sense that taxpayers only subsidize the “rent” payed by Ardell @ probably somewhere in the 30% range. (who knows her income, does she pay all of her own FICA @ 16%, the total interest and other deductible fees and taxes paid, etc.) But most all renters get nothing of the sort. And if you include the total losses in the “economic rent” concept and taxpayer funded bail outs, etc, then the total would be much higher. But that wouldn’t affect Ardell though. What it does show is that at the time of her purchase all of the incentives in the “system” were wrong if sustainability was the goal.

  114. 114
    Scotsman says:

    RE: AMS @ 112

    Heh. That was a test.

    I failed. Sorry! ;-)

  115. 115
    AMS says:

    RE: Scotsman @ 114 – I often scan for replies to my messages…

  116. 116
    Scott is Rad says:

    By David Losh @ 100:

    RE: Scotsman @ 98

    All Obama would have to do to jump start the economy is to direct the Government Purchasing Office to start buying American. Where could he go wrong? How about directing some of this TARP money that seems to be coming back at manufacturing?

    It’s simple, goes to creating jobs, puts pride back into the American product and work force. It would probably pay for itself.

    Already in place. I recall there was some problems with implementation but I’m too tired to find any links…

    https://www.acquisition.gov/far/current/html/Subpart%2025_1.html

  117. 117
    OldGuy says:

    RE: Kary L. Krismer @ 105

    If I remember right, the issue of Ardell’s home purchase/short sale started with Dawn Glover’s post #10, her “first attempt at blogging.” Although it is very redundant, I feel it is important to remind people there are other motives than you or your family’s well being to some realtors. This should be kept in mind when hearing advice from realtors. After all, most of use don’t work in the real estate business and aren’t calloused to dealing with the system.
    Yes I realize that Ardell was the buyer and agent, that’s why she got the 34K commission. Let’s put that into perspective, how long would it take one of your average clients to earn that much? This makes me question the motives of real estate agents that blog frequently encouraging people to buy a home. Is it because the real estate agent enjoys the business or is it for the possibility (however slight) of a commission.

  118. 118

    “This makes me question the motives of real estate agents that blog frequently encouraging people to buy a home. Is it because the real estate agent enjoys the business or is it for the possibility (however slight) of a commission.”

    It’s pretty obvious to me what the motives are of real estate agents who blog frequently encouraging people to buy a home. It isn’t simply that they, as individual agents, think they’re going to get a commission. More that they want to put it out enough times so that people will be convinced that it’s a good time to buy and that homeowning is a moral obligation. In some cases, they’re surrounded by people who spout those views and they’ve just drunk the Kool-Aid.
    In the case of those agents, including myself, who post frequently on Seattle Bubble, I think it’s a little different. We’re just in love with our own voices and love seeing our name in print. We think we’re brilliant and add something to the conversation.
    To be honest, of course I welcome any business that results from people reading my posts, but, in my case, I’ve never uttered the words ” It’s a good time to buy”, or encouraged anyone to buy. Partly because in general I don’t think it’s a good time to buy, that renting makes a lot more sense than buying in some cases, and also how could it possibly help me to parrot all those BS real estate agents by muttering the same tripe that they do?

  119. 119

    RE: Scotsman @ 113 – I don’t believe the interest deduction would affect the social security taxes paid, unless she was deducting that as a business expense, which would be questionable if she was living in the house.

  120. 120
    David Losh says:

    RE: Scott is Rad @ 116

    “Restricts the purchase of supplies, that are not domestic end products, for use within the United States. A foreign end product may be purchased if the contracting officer determines that the price of the lowest domestic offer is unreasonable or if another exception applies”

    I’m talking about something with teeth, rather than loop holes. What I’m really talking about is that the President has been absent from view during the final days of the health care debate. He made a statement at the Climate Conference that was immediately over turned as soon as he blew out of town.

    It looks bad. The economy looks bad. The TARP money coming back, having a “teleconference with bankers,” banks investing in the stock market, carry trade, and commodities, credit card rates going up, the consumers being squeezed, it all looks bad.

    The President needs to be in front of the American people at this point.

  121. 121

    RE: Scotsman @ 90

    Trigger: No Inventions and Junk from Foreign Insource Companies

    Just because Bush and Obama are doing it doesn’t mean its good. Rationalizing status quo as always apt can be inadequately done, but using your own intelligence to think it out makes far more sense than just being led by corporate goons.

    If our universities are plumping up America’s brain drain, where’s the beef? We don’t invent a darn thing anymore, PhDs don’t publish hardly anything anymore and college jobs are down in the sewer to “made in America non-union assembly plants’ with all the engineering, business and management in Japan, S. Korea, Europe, etc, etc…..

    We do bring in foreign students and graduate less domestic ones, and many of the foreign ones return to their motherlands with hardly any mentoring by our seasoned scientists and our domestic youth gets no mentoring either, because we graduate less of them and/or they can’t get a college degreed job anymore anyway.

    As far as today’s debt is good and innocuous you blabber, please give us a website? Your verbal opinion is nonsense.

    Article in part:

    “…Debt as a percentage of GDP is now 356%; during the Great Depression, it was 260%…”

    http://www.minyanville.com/articles/print.php?a=19357

  122. 122

    By Ira Sacharoff @ 118:

    In the case of those agents, including myself, who post frequently on Seattle Bubble, I think it’s a little different. We’re just in love with our own voices and love seeing our name in print. We think we’re brilliant and add something to the conversation.

    Guilty as charged. ;-)

    Also, I think people greatly overestimate the amount of business blogging generates. I don’t think there is any agent that makes a living off of blogging leads, and there are probably a lot of other activities that generate many more leads. Put two and two together people: If blogging generated a lot of leads, with the average commission being around $12,000 a pop, would we be having one of our recent conversations here? :-D

    For me blogging is just part of keeping up on things occurring in the industry. While those of you not in the industry might not fully understand the industry, you do post some interesting things about it. I get far more pieces of information here and at RCG than I do from traditional news sources.

    What I will say is that the leads that come from blogging activity tend to be more interesting. The client I consider the most interesting came from Zillow, but perhaps my opinion might be biased because that client was also an attorney.

    Finally, while I realize there are a lot of people that visit sites like this that never post, I hope there are more agents reading SB than Ira, David, Ray and myself. I don’t understand how an agent could keep up with the industry without reading multiple sites that address real estate issues.

  123. 123
    AMS says:

    RE: Kary L. Krismer @ 122 – How about cost of the leads per sale? Or how about internet advertising costs as a percent of revenues related to those sales?

  124. 124

    RE: Kary L. Krismer @ 122
    There have been a number of ” fly by night” agents who have posted on Seattle Bubble and quickly vanished, after saying things like “You people are full of crap. If you don’t buy a house right now you are going to wallow in filth forever, living as a renter surrounded by crackheads, rats, and cockroaches.”

  125. 125

    RE: AMS @ 123 – That would depend on how much you value you time (and how objectionable/enjoyable you find blogging to be).

    I think if you really wanted to generate a lot of leads, probably an advanced Internet site would be the best and cheapest per lead. There’s one agent I know that has been very successful doing that.

  126. 126
    AMS says:

    RE: Kary L. Krismer @ 125 – per sale, per dollar revenue is much better than cost per lead.

  127. 127

    On this topic, one thing Trulia just started is a point system, where agents get points for posting, having a thumbs up answer, etc. If you have 3000 points you become a VIP 1, and at 24,000 points a VIP 3. I’m not a VIP at any level even though I post there quite a bit.

    http://www.trulia.com/voices/what_is_vip/

    Anyway, I think all of the agents that I’ve seen with VIP status have been out of state, and the only threads I review are Washington threads. So presumably they get the high point value by posting where they have zero chance of getting a lead. So that fits in with Ira’s theory on agents just wanting to contribute.

    Oh, BTW, I often don’t even respond to potential leads from Trulia that contact me by email, and I don’t think I’ve even had a client from that source.

  128. 128
    AMS says:

    RE: Kary L. Krismer @ 127 – “Oh, BTW, I often don’t even respond to potential leads from Trulia that contact me by email, and I don’t think I’ve even had a client from that source. ”

    That’s exactly why the number of leads is not as important as the quality.

  129. 129
    AMS says:

    RE: The Tim @ 1 – It’s Monday!

  130. 130
    The Tim says:

    RE: AMS @ 129 – Argh! I scheduled Monday’s post last night, but WordPress for some reason failed to publish it on schedule. It’s up now.

  131. 131
    AMS says:

    The Tim-

    I know you sought to lend out cash.

    Here’s an opportunity! $100 interest on a $200 less than 30 day loan.

    “I’m looking for a short term loan of 200.00. I was hoping to pick up some Christmas season work, and have been going to the day labor here locally but everything is a no go. I am a college student and I will be getting my financial aid check on January 4th. In return I will pay back 50.00 per hundred borrowed. So that is 300.00 for a 200.00 loan. Can show enrollment and benefits letter. Thanks for looking.”

    http://portland.craigslist.org/clk/wan/1519772903.html

    How could you go wrong?

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