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Helpful Post-Bubble Negotiating Tips


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2006 Jun 6, 7:11am   11,679 views  204 comments

by HARM   ➕follow (0)   💰tip   ignore  

negotiating 101

DinOR said:

All of a sudden I’m not having much difficulty visualizing buyers asking their realtors “Don’t show me ANYTHING that was purchased in 2005".

Don’t show me anything purchased in 2004.
Don’t show me anything purchased after 2000!

After the few buyers that ARE out there actively seeking a home have kicked through one over priced shitbox after another they are going to have to draw the line! I mean from a pure practicality standpoint. My husband doesn’t get home from work until 6:00pm and we only have an hour before kids/dinner/homework etc. Please stop showing us these places where the seller is upside down and can’t afford to come down on price, unless! They are willing to negotiate a short sale. If not, please don’t waste our time and start showing us “pre-2002″ purchases or we’ll find someone that will.

Also:

Now I’m fully prepared to deal with all the grief so bring it on. Well what if a couple paid CASH in 2005 and just wants out? They’re entertaining all offers! O.K, I’m willing to allow that.

Well what if some couple bought in 1985 but have House ATM’d it to death? Couldn’t they owe more than the place is worth? Don’t know, don’t care. Since Surfer X has already well established that this person basically “re-purchased” their home, it would not qualify. Please don’t show it to me.

Robert Coté said:

I don’t see any reason to buy from someone upside down. They don’t have any room to negotiate and there’s going to be more lawyers and other bloodsucking beasts feeding off the carcass anyway. Much easier to find the unHELOCed bought in 1995 shabby fixer where the seller is happy to double their money and get out. All those “Buyer agrees to….” documents are sure to come back and bite you. No, I’ll take the nice empty nest couple who are happy to get a check at closing rather than the desperate conivers who are so upside down they have no morals left with which to deal honestly. The important thing to remember, everyone else takes money away from the table. The only money usually brought to the table is the buyer’s. Even now as the sellers are facing the prospect of bringing money to the table it isn’t the same as they are trying to stop the bleeding. No, I’ll deal with the smart, calm people instead thankyouverymuch.

Anyone else have a few gems to share?
HARM

#housing

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154   HARM   2006 Jun 7, 5:51pm  

LILLL,

I had personally been hoping to invest in Vanguard's Precious Metals and Mining Fund (VGPMX), but sadly they closed it to new investors just as I had saved the money and made up my mind to pull the trigger. :-( I'm hoping they will re-open soon, as VG's emphasis is on SIMPLE for retail/dummy investors (like me) and they tend to be conservative.

If you're interested in foreign denominated CDs, I'd exercise great caution and spend some time edumacating yourself online (and re-reading our previous investment threads). Everbank.com was one of the frequently recommended sites, as I recall.

IAACIWICTI-NIA
(I Am A Complete Idiot When It Comes To Investing - Not Investment Advice)

155   HARM   2006 Jun 7, 6:07pm  

To BA Or Not To BA Said:
The melt-down is worldwide. I would request the thread masters to start a thread to discuss this. Stock markets are a good leading indicators. Let’s speculate what this means for us.

John Haverty Said:
June 3rd Economist:
Australia, Austria, Belgium, Britain, Canada, Denmark, France CAC 40, France SBF 250, , Germany, Italy, Japan/Nikkei, Japan/Topix, Netherlands, Spain, Sweden, Dow, S&P, NASDAQ, FTSEuroFirst 200, FTSE Euro 100 and the World/MCSI are all off 2006 highs in this issue by about 5% or so. Interestingly the world bond market by Citigroup is not off highs.

So this certainly doesn’t look like markets charging ahead hard, and this week has been pretty nasty as well.

Germany is looking ok, they have a good trade surplus and lots of indicators look on the up and up. Merkel isn’t hurting things either. It should go up, it wore a heavy albatross for many years.

I agree that this sounds like a fine thread topic, but as I personally don't have enough general world finance knowledge or source links for the topic (and you gentlemen do), I nominate that one of the following start this new thread:

To BA Or Not To BA
John Haverty

All you need to become a thread author is to:
1. Self-register http://patrick.net/wp/wp-register.php
2. Let me (or Patrick, Randy H, Peter P or SQT) know that you want authoring rights.

Once you have the rights, starting a thread is easy-peasy, lemon squeezy.

156   Randy H   2006 Jun 7, 11:44pm  

Germany is looking ok, they have a good trade surplus and lots of indicators look on the up and up. Merkel isn’t hurting things either. It should go up, it wore a heavy albatross for many years.

"The Economist", which I read religiously, has no shortage of in depth articles detailing the deep, structural problems with the German economy. Two of the many problems include chronic consumer lack of confidence which permanently dampens domestic demand and an enormous reliance on export trade which is highly exposed to further rises in the EUR. And then there's always the Hartz Vier reforms and the 20% unemployment in Berlin and Neu Laender.

But hey, that's down from 21% in 2005. Germany is looking OK. They just keep on building more Wolkenkratzere, even if there's no one to lease them but the gov't itself.

157   Michael Holliday   2006 Jun 7, 11:56pm  

John Haverty Says:

Inflation Haiku:

The numbers are cooked
Inflation ravages all
The greenback is dead

_____

Sweetness! Music to my ears...

That was some beautiful art.

158   Randy H   2006 Jun 8, 12:01am  

LiLLL,

Do you think I should buy my next CD in euros? Or is it too late for that?

You can certainly do that. You are fighting two forces that want to counteract the benefit you get from earning EUR interest:

1) Transaction costs. You'll pay slightly higher costs to open, close, xfer the acct.
2) Forward interest rates as related to covered interest rate parity (CIRP) and your exposure to spot-rate risk.

What that means more simply is that the guys who set the exchange rates aren't stupid. They don't just let you open accounts in one currency with another currency and then reap the profits in your home currency. They set the forward exchange rates based on ensuring that no-one can arbitrage interest rate differences. In fact, you won't find any ability to ever take advantage of earning higher rates in another currency (except in unstable emerging markets) without also bearing the full load of day-to-day spot market risk. To make your EUR CD work and be worth the risk you also have to buy some smaller portion of euros forward coinciding with the period when you want to exchange back to dollars, and that probably eats up your advantage unless there is a huge, _unexpected_ correction.

If you intend to keep a EUR account for a long time, then you are better off to just actually open a physical account in Europe and let that stock of money go forward separate from your USDs. This is what a lot of folks who travel to Europe alot do, especially those with some source of EUR denominated income.

159   Randy H   2006 Jun 8, 12:10am  

I should also note that the US Gov't is quite tax unfriendly when it comes to earning any foreign income that isn't taxed locally. Even when you don't owe any additional US taxes, you have to pay a decent tax accountant because Turbotax won't handle this stuff. The folks I referred to above with EUR accounts also tend to have set up businesses to help them shelter taxes.

160   DinOR   2006 Jun 8, 12:41am  

SFWoman,

I'm probably the last person to buy into cell phone induced cancer etc. (even though I don't have one) but my objection centers around the "appearance" of power lines. My wife and I looked at a home in the country and wondered why it was taking so long to sell. We finally got curious enough to get out of the car and low and behold your "view" of the valley was almost completely obscured by MAJOR power transmission lines! (Heavily treed area, wouldn't notice at a casual glance). I guess it's a form of nimbyism b/c everyone needs power I just don't want to wake up Sunday morning and find a hot air balloon's gondola dangling in my backyard.

161   DinOR   2006 Jun 8, 12:44am  

George,

Are we to take it that unless you are serious about selling (and can at least come up with $500 bucks) kindly do not waste Mr. Morgan's time?

162   DinOR   2006 Jun 8, 12:49am  

George,

Before I close out my short position on $, I have to ask myself, why is it that BB is so eager to show he's not bashful about raising rates. Rosenberg (over at Merrill) says a June rate hike "is already in the bag" to borrow from our bullish Orange County friend. I'll give it a few more days and re-evaluate. Btw, shorting the S+P 500 is going quite well though thank you.

163   DinOR   2006 Jun 8, 12:54am  

George,

Btw, talk about an "illiquid investment!" Not only can I not get out of my flipper home at what I owe (never mind what I think it's worth) I can't even get a realtor to list it unless I come up with cash on the barrelhead?

164   DinOR   2006 Jun 8, 1:29am  

George,

Agreed! In fact had his mentor done 50 bps. hikes instead of 1/4 point hikes maybe people would've thought they were half way serious about putting an end to the insanity! In the past the general rule of thumb was that it takes about 9 months (3 qtrs.) for a hike (or reduction) to be felt. But back to the original question, how is it that consumers and realtors consider a 30 yr. FRM under 7% punitive? I think that for DL to plead with BB tells us that real estate is in real trouble. If we've created a market scenario that can't sustain itself with 7% money we've got problems! One of traders on the "Merc" yesterday said that now the "real" debate on the cost of money begins. Was he wrong?

165   edvard   2006 Jun 8, 1:37am  

Speaking of high voltage transmission lines, I grew up very close to an enormous power plant. There are actually a lot of power generation systems in the TN valley. over 15 hydroelectric dams, one nuclear plant, and numerous hard coal fired turbine plants. There are power lines that zig-zag all over the place, often over houses. There hasn't been any noticeable increases in cancer, etc, and these have been in place since the 1930's.

166   edvard   2006 Jun 8, 2:04am  

What really irks me is that JUST NOW, the mainstream media sorta-kinda' admits that there is a "softening" in the RE market. The cover of Money magazine says: " What's next for RE?" followed by a few smattering of articles ALL targeted towards homeowners like:" How to sell in a "soft" market.", and- " The fastest ways to add value to your home."
These articles sounded like flipper/investor jargain. Why do these publications NEVER publish anything that's useful to people that are locked out? My best guess is that these publications get HUGE sums of money from RE companies. Any nasty bashing would result in less advertising dollars.

167   edvard   2006 Jun 8, 2:13am  

Hellboy.
Nope. " Gorgeous!" isn't a word that comes to mind when I see it either.

168   DinOR   2006 Jun 8, 2:20am  

hellboy,

That place is "homely" at best. Notice the 1970's "peel and stick" Armstrong flooring did ya'? 1.1 mil? Me thinks not. Would have been a great contribution to the overvalued blogspot!

169   DinOR   2006 Jun 8, 2:24am  

Is it just possible that BB is his own man? Is it possible that while giving the nod to AG's policies and posture that he held convictions of his own? Is there any chance that he saw a bubble when Greenspan could not? Is it entirely possible that he has no interest in "continuing the good work" started by AG?

170   DinOR   2006 Jun 8, 2:27am  

WW2,

I take exception to the notion of being "locked out!" That would tend to imply that I WANT IN! We have all at one point tired of our parents saying "everything happens for a reason" but this is ridiculous!

171   FRIFY   2006 Jun 8, 2:29am  

Speaking of mlslistings.com, I figure it's worth getting the SFH inventory supply on record. I wish I'd been doing this more regularly as I recall San Mateo at 900 in October:

San Mateo (all price ranges): 1363
San Jose (all price ranges): 3669

Has anyone has been logging this more regularly.

Re: Market Tanking, Financial times had an article about how the average investor underperform the S+P 500 because they try to time the market and are usually swayed by emotion to do the wrong thing, thus I wouldn't do anything drastic to 401K/IRA money. For the record, your house downpayment fund is better off in something liquid anyway (see Randy's post). I'd add I-bonds to the mix but they were hammered by some bogus CPI reassessment this last 6 month round (funny how that was right before Bernanke starts harping about inflation...)

172   StuckInBA   2006 Jun 8, 2:36am  

Frify,

Maybe this site will give you waht you are looking for.

http://www.benengebreth.org/housingtracker/location/California/SanJose/

173   StuckInBA   2006 Jun 8, 2:37am  

HARM,

Yes, I will register to become thread author. Thanks.

174   DinOR   2006 Jun 8, 2:41am  

FRIFY,

Funny indeed! Where you referring to the "TIPS" ticker TIP? They're down about 8% over the last 52 weeks. What (other than shorting) IS working out there?

175   skibum   2006 Jun 8, 2:45am  

RE: BB and his "tough talk," my personal theory is that he is setting himself up to be able to only raise another 25bp this month (rather than the needed 50bp) and still appear tough on inflation. I'm sure he and the rest of the Fed are acutely aware of what's been happening to the markets this week as a result of these speeches. 3-4 speeches by Fed people all basically saying the same thing in 1 week - sounds like a preplanned, concerted effort to me.

176   FRIFY   2006 Jun 8, 2:51am  

TBAONTBA,

Thanks for the pointer. I wish it extended for more than 9 months. It's hard to factor out the seasonal variation in the current format.

DinOR,

This chart is what I was referring to:

http://www.publicdebt.treas.gov/sav/sbirate2.htm

My 2000-2002 Ibonds were performing sweetly until May. Hopefully they'll reassess well this November. The current fixed rate for new I-bonds is pretty pathetic unfortunately and they come with a 1 year wait (unlike the old 3 month one...)

177   skibum   2006 Jun 8, 2:51am  

hellboy,
That house is pretty run-of-the-mill. It's in an overall pretty good area, but looks like it abuts 85, just north of 280. That's a heinous location - does anyone know offhand if that's where 85 is 5-6 lanes each way? At least it's an easy commute in terms of getting on/off the freeway...

178   edvard   2006 Jun 8, 2:52am  

Dinor,
I suppose my comments are for the current state of things. I'm not at all in a financial state of being even close to affording anything here. Seriously, the MOST I might afford would be in the upper 300's, lower 400's. I think that's why out of most of the posters here, I feel a little more hopeless concerning the situation. That means housing would have to dip almost 45%. I don't see that happening soon, and if it did, the economy would be in the shitter as a result.
And for Boxta, I know people who did the same thing as you're possible able to do, and they seemed pretty happy with the situation even though the amount of appreciation allowed is minumal, yet still double the traditional average. I think it is a max of 7% appreiciation, which isn't bad. That said if you HATE the area, then nothing is cheap enough to be worthy to live in.

179   StuckInBA   2006 Jun 8, 2:55am  

LILLL,

I am not an expert in currency trading etc. I looked at the Eurobank CDs for myself and decided against them, precisely because I cannot evaluate a currency.

I chose mutual funds instead. There are funds that invest in foreign bonds. See if they fit your need. There is no guarantee of principal. But there is diverification across multiple currencies. Yield is acceptable.

I have MERKX. They invest in Euro AND Gold. Intersting combination.

180   skibum   2006 Jun 8, 2:56am  

Boxta,
My thoughts on what you described - if you're not happy with the actually home, in terms of location, the house itself, and all that outside of any financial considerations, it doesn't seem worth it to me. Add on top of that the restrictions on resale that you mentioned, then it would only make sense if you and your fiance would be psyched to live exactly there for many years. Finally, you mentioned briefly comparing interest/tax vs current rent - unless you're just using shorthand, are you considering an interest only loan (bad idea)? And don't forget insurance, HOA fees, maintenance, added commute costs, etc.

181   StuckInBA   2006 Jun 8, 3:11am  

FRIFY,

I hear you. I was going to invest in I-bonds myself. So I waited till the anounce the new rate. 2.45% ?? Who wants to invest for that kind of rate ? And inflation adjustment is 0.5% ? This is worse than the fabricated CPI.

I am glad there are so many better and equally safe alternatives. Recently Citibank came up with their online only account. They give 4.75% ! No minimums and all the standard stuff.

182   StuckInBA   2006 Jun 8, 3:14am  

George,

The liquidity crunch you mentioned was also the topic of 2 recent Jubak articles on MSN investor. Of recent, I have likeed his articles on general economy and global analysis. He made a lot of sense, and the articles were very easy to follow.

183   edvard   2006 Jun 8, 3:22am  

"middle class neighborhood..."
@ 1.1 million bucks for a Brady Bunch house, I can't imagine it'll stay middle class much longer.

184   Peter P   2006 Jun 8, 3:40am  

I don't know. My wife can point out the nearest cellphone tower blindfolded.

We can literally hear powerlines.

185   edvard   2006 Jun 8, 3:42am  

You can also cause a flourescent light to glow simply by dragging the tip over carpet or rubbing it quickly with a cotton rag. I'm not sure if the theory of holding a flourescent tube in the dark under powerlines is proof that there exsists a health hazard.

186   skibum   2006 Jun 8, 3:44am  

RE: The Fed, how about all this bear-a-licious news today! Dow down over 100pts so far, Fed #2 nominee Kohn with yet another anti-inflation talking point, and ECB, India, and Korea CB's all raising their interest rates. What's going on?

187   Peter P   2006 Jun 8, 3:48am  

I’m not sure if the theory of holding a flourescent tube in the dark under powerlines is proof that there exsists a health hazard.

I do not need proof. I can feel it.

Science is overrated.

188   Peter P   2006 Jun 8, 3:48am  

Gold is down though.

190   FRIFY   2006 Jun 8, 3:49am  

What’s going on?

The trap is closing on the ARM crowd who listened to Greenspan's financial advice. Bwahahahahaha!

191   skibum   2006 Jun 8, 3:57am  

FRIFY,
In all seriousness though, I doubt it's the ARM crowd driving the markets down. There may have been early sell-off due to rate hike concerns, but it seems like there's a bit of a snowball effect building, as everyone's getting the idea that it's time to sell??

192   HARM   2006 Jun 8, 4:00am  

DinOR Said:

Is it just possible that BB is his own man? Is it possible that while giving the nod to AG’s policies and posture that he held convictions of his own? Is there any chance that he saw a bubble when Greenspan could not? Is it entirely possible that he has no interest in “continuing the good work” started by AG?

Boy, would I love for this to be true! Before we start getting all worked up about BB becoming the next Volcker, though, may want to consider all the powerful forces/interests currently aligning against him and a strong-dollar policy:

--NAR/MBA cartels and their $bazillions in lobbyist & "consultant" mony in Washington.
--Congressmen up for re-election this year (100% of House, 33% Senate), who don't want a recession to mar this wonderful "Goldilocks economy" we're enjoying.
--An administration that proudly touts it's "ownership" society/record homedebtorship stats at every stump speech.
--A massive entrenched Federal bureaucracy that does not want to its Twin Monster entitlement program obligations (S.S. & Medicare) to grow any bigger in real terms, not to mention the interest paid on the National Debt, thanks to a rising dollar.

In the X-Files parlance, "I want to believe", however, "actions speak louder than words". We shall see...

193   FRIFY   2006 Jun 8, 4:03am  

DINOR,

Yeah, well their combined yield from Nov-May on new I-bonds was 6.7%. If you buy them now and the new inflation rate hits 3% (Bernanke's number) in Nov, their yield might spike even higher. Only a new house will convince me to cash in my early I-bonds with 3% fixed. With an anticipated X% leveraged drop in the house price that won't be happening anytime soon.

Don't forget, no state taxes on these guys (more important down here in Cali).

FYI - Etrade CDs (6mo) are at 5.21% I'm sure there's better out there if you shop around.

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