Friday, September 21, 2012

How to Sell a House

In an earlier post, I noted that my brother and I were selling a house in Pennsylvania.

Well, in mid-June we closed on the sale.

It was interesting to be on the other side of the table so soon after purchasing a home.  The process suffered a bit in the same way it did as when I was a buyer - lack of communication.

Because it is a negotiated deal that isn't complete until the buyer has the keys and the seller has the proceeds, neither side wants to show their cards.  When I was a buyer, I became terribly frustrated by the lack of responsiveness from the seller.  It was also impossible to know whether the seller was ignoring me, whether it was the seller's agent or lawyer that was behind the silence, or whether people weren't on the same page in terms of pace and reading / responding to e-mails.

Getting an offer
As the seller, I ran into this again.  We received an offer that we felt was low but we had at least one or two other potential buyers set to see the house before that offer would expire.  We didn't want to counter the low offer without knowing if we might have another offer coming in.  We'd also had a few other showings (although not the volume we'd have hoped), but often the agent for the other side wouldn't leave feedback.  This left us wondering if there was real interest in the house or if people were just using up a sunny Saturday to go "window shopping" through open houses.

In the end, the other interested parties either weren't interested, or cancelled their showings.  So, we were left with a low offer and not great prospects.  If we had regular showings, we might be inclined to think we could let the low offer go since another might be coming.  What really got us moving though was that the current renters let us know they were planning on moving out.

We eliminated the option of accepting the low offer which left us with two options: #1 Counter the offer with a number that we would be more acceptable or #2 No counter and keep the house on the market.

Our agent was careful to advise us that even if our higher counter offer was accepted, the agreement was still conditional and the Buyers could come back with requests for repairs and such to bring the effective price down.

We countered the offer and were happy yet cautious that it was quickly accepted.

The Sale Process
Pennsylvania thankfully has a standardized template for a sales contract so we didn't need to hire a lawyer.  The Buyers had agreed to our price, but the offer was conditional on an inspection and approval of their financing.

The Buyers also wanted to move in rather quickly, so we needed to have the current renters vacate so that the house would be ready.

The inspection did turn up several items in need of attention.  Some were "musts" - the bank would not approve the loan if they weren't remedied, while others were items where the Buyers were looking for us to pay for or help pay for repairs.

We had supplied the Buyers with our own inspection at the beginning of the process so we were less than keen on the idea of paying to replace the roofing shingles when they should have known they were old before putting in an offer.  We also knew they wanted to move in quickly, so this gave us leverage in terms of what we were willing to budge on.

We did have to pay for termite inspection and treatment, as well as treatment and pumping of the septic system, and for some old lead paint to be removed from window frames.  These were all required items.

The Buyers, given the time squeeze, didn't have much of an option - they could either accept where we were willing to budge or hold out for more, but potentially delay closing.  Again, because of lack of direct communication, I'll never know if they were perhaps furious at us for not budging on these types of repairs, or maybe they just thought they'd try and see what they could get.

Another breakdown in communication did end up delaying closing and I believe the Buyers were out of their previous house and had to stay in a hotel for a few days.  Pamela and I had to deal with this and understand how much of a hassle it is.  Their inspector had pointed out the lead paint on the windows needed to be removed and repainted.  Somewhere between their inspector, our agent, and the handyperson who we hired to do the work, the detail got lost that both the inside and outside of the window frames needed to be treated.

Their inspector came back a few days before closing to do a final walk though and pointed out the inside had not been dealt with.  We got our handyperson to go back, but the inspector couldn't return for a few days which delayed the bank's ability to close on the loan file.

On to Closing
Neither my brother nor I had to attend closing.  We had our agent attend and sign the final documents for us.  It was very straight forward for us - we got a statement the day before with the final numbers (which had a mistake), then we got a call after closing from our agent to say that it was complete.  We got a direct deposit of the net proceeds the next day.

Thursday, September 13, 2012

Best of the Web

I have a bunch of drafts of posts that I've been working on that relate to buying a home and making it your own.  Lately though, I've also felt inclined to do more "off-topic" posts.  I hope that irrespective of how you arrived here, you find these off-topic posts interesting.

Today, I wanted to share a list of websites that I read frequently.  These sites may not be very well known, but if you are interested in the subject matter, I think they are good reads.

Ana White - how-to site with lots of project plans
This Old House - guide on indoor and outdoor home improvement

Flightblogger - analysis of the aerospace industry
New Fuelist - aggregator of interesting energy / new energy news
The Hill - political news, that in my opinion, isn't slanted
The Onion - satire

DealBreaker - finance news but with a tabloid twist.
Mish's Global Economic Trend Analysis - daily analysis of key economic news.  Not doom-and-gloom, but a frank take on the state of global affairs.
ZeroHedge - frequent posts on intra-day stock market news.

3 Jack Golf Blog - one man's blog on golf equipment, the PGA Tour, and his own efforts to become better
GolfWRX - articles and forums for all things golf, but more of a focus on equipment
The Dan Plan - follows the efforts of one man who dropped everything to become a pro golfer

Barstool Sports - city-specific blogs covering news and sports - very funny
Lifehacker - ways to improve your life with a technology focus
The Pen Addict - review site of various pens
Dog-Shaming - we've submitted Lucky

Thursday, September 6, 2012

Off-Topic: Election

How about a quick non-partisan opinion on the upcoming election:  we're kind of screwed either way.

A lot has been made about the US cumulative deficit surpassing $16 trillion this week.  That's $16 with twelve zeros!


Here's a site tracking all manner of debt statistics:  US Debt Clock

The upcoming election will provide this country with two candidates who may appear to have very different plans, but the reality is that neither is offering much in terms of a solution to this country's overspending.

This year, the US government will spend a bit north of $1T more than it takes in from taxes.
Candidate A has a plan to get that annual deficit to about $500B per year in three or four years while Candidate B projects that annual deficit to be about $700B in three or four years.  There are a lot of differing assumptions and there's never enough detail, but you can be certain that those numbers aren't a "pessimistic scenario".

Here's a great picture:

Mish at Global Economic Trend Analysis has a great interactive chart where you can compare debt, spending, interest, etc

Again, there are a lot of assumptions in all of these numbers, and in no way am I trying to say that the Ryan budget (not the same as the Romney budget) is the better alternative.

So What?
That's the hard part.  For years, fiscally conservative pundits have decried the annual budget deficits and said that a "day of reckoning" is coming as the deficit surpassed $5B, $10B, and so on.  The US's credit rating was officially downgraded last summer - the stock market fell, but the downgrade had perhaps the opposite effect on the interest rates the US government pays to borrow.

Since the US government can't fund all of its spending from the taxes it takes in from its citizens, it borrows from the rest of the world.  Luckily, the rest of the world is in a real mess of its own right now.  Greece, Italy, Spain, and others are in such poor fiscal shape that they are paying 6% (on 10 year debt) or more to borrow from the rest of the world.  Investors see the US, Germany, and a few other countries as being safe havens so they are willing to lend to them at 1% or 2%.

The downgrade of the US should have made investors more cautious on the US and led to the government paying higher rates.  It hasn't happened - yet.

What will happen, at some unknown point in the future, is that investors will demand higher rates to loan to the US if our deficits continue to grow as they will fear our inability to pay them back.  Like what is happening in Europe right now, this tends to happen very quickly.  If the US government then has to pay 4%,  5%, or more, then more of the income from taxes will go to simply paying off the interest on the borrowings form the past decades.

The ultimate end scenario is a default or devaluation of the currency which has happened in many countries throughout the world, most noticeably/recently in Latin America.  The US could one day simply say "we're sorry, but we we don't have the money to pay back our loans so we won't" which would end the flow of money into the country.  The other form this could take would be through hyper-inflation.  The US government has promised to repay its loans in dollars - well we own the printing presses, so we can always print however many dollars we need.  This would be problematic because the economy is global and when you go to the pump to buy a gallon of gas, if no one trusts the value of the dollar, that gallon could cost $10, $100, $1,000 or more.

The Solution
Spend less than you earn.  So simple, but probably impossible.

The last time the government earned more than it spent was during the mid-1990s due to the internet fueling global economic growth.

I'm not trying to be preachy, but if you want to solve for the deficit (which means not focusing on making life better for everyone):
Defense - a huge annual outlay to protect our interests globally, defend against terrorism, etc.  I am a big supporter of our troops and their hard work, but we simply can't afford it.  The trade-off would be China or someone else growing into the #1 military super power and our country not being involved in global conflicts (this can be good, but you do have situations - Syria- where someone needs to step in when civilians are getting slaughtered).  This would also mean leaving Iran or North Korea to develop weapons if they so desire - again, tough to say we're better off in that situation.

Social Security - those in their 20s and 30s should assume that they will never see one cent from the deduction taking from each paycheck for social security.  We'd probably need to raise the retirement age too, but that'd affect a key demographic that actually votes.

Healthcare/Medicare/Medicaid - medical care is too expensive and we can't afford to provide even basic services to our citizens.  Ain't that sad?  Both parties have talked about reforming the system to bring down costs - ObamaCare versus the Republican plan to privatize/create exchanges.  Neither solution is enough.  Perhaps we should require all high schoolers to take some basic training in medicine?  Your friend gets a big cut, hand him a beer and stitch him up rather than going to a doctor.  The problem in the long run is that while we are making real advances in medicine and technology that can help people live longer, most can't afford it without government assistance.  So do you want healthcare for all that the country can't afford or allow only the rich to be able to afford modern medicine?

The recent healthcare debate also talked about "Death Panels" - the reality is that an immense amount of spending on healthcare comes at or very near the end of someone's life.  My grandmother spent most of the last months of her life in the hospital getting treatment.  In some cases, treatment can save a sick person and add decades to their life.  In others, millions of dollars are spent to maybe add a few months.  How do you ration spending?  Who should make the decision whether it makes sense from a fiscal standpoint to operate on your grandparent to add a few more years to their life?

I would like to end this little rant with some serious decisions/solutions, but I don't really have them.  I think this is also perhaps the core of why our Presidential candidates are quite similar.  If you want to win an election, you can't take out-of-the-box positions (see Ron Paul).  If you want to change the way our country spends, you have to upset a lot of people and make this country "suffer" for the long-term good.

Therefore, I think we need a Dictator, and I am ready to toss my hat in the ring.