Sounds like a Nancy Drew mystery, doesn't it? A few days ago, I wrote this:
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From Prudent Bear. Like me, you're probably asking "Thomas WHO? This guy wasn't in any of my econ classes!"
An interesting read nonetheless.
"Mun (1571-1641) wrote a classic magnum opus "England's Treasure by Foreign Trade." Published only after his death in 1664, it was nevertheless very influential. Mun had been a Director of the East India Company, and, unlike earlier theorists, believed that foreign trade was beneficial. However he didn't hold with any high-faluting nonsense like comparative advantage, or maximization of global economic welfare. For Mun the purpose of foreign trade was to export more than you imported and, consequently, amass a huge store of foreign "Treasure," which you could then use to found colonies that would take control of natural resources.
To further this objective, countries should: cut back domestic consumption as far as possible; increase the use of land and other domestic resources to reduce imports; encourage the export of goods made with foreign raw materials; and export goods with price-inelastic demand because profits would be greater."
____________________________________________________
Sound familiar? It should--it says "make due with what you got, or go without...use it up, and wear it out," only on a grander scale. He saw demand from abroad and wished to take advantage of it, just like any good businessman would. Think of it as global frugality--tight money and resource management at home, and tight money and supply management at work.
Things never change...just the vocabulary.
Friday, July 31, 2009
Wednesday, July 29, 2009
Update: Buying Houses at Price-Per-Unit
The Real Estate Carnival crowd has told me that my $-per-square-foot formula doesn't work, because it doesn't take into account things like location, amenities, condition, etc. How much dollar value does one assess for those things? They are intangible, and therefore, shouldn't receive much in the way of monetary compensation (in my mind).
This stuff is tantamount to corporate "goodwill" (which is worth what you believe it is), or even the cachet given to brand-name items. They are worth what you believe they are worth, and there's no hard-and-fast way to assess these things, so why even count them to begin with? These are M-A-R-K-E-T-I-N-G, plain and simple, and why should you pay for that?
Shouldn't the cost per square foot take those things into account before it gets assigned? Why must we add on another mystical amount for things that should be inherent in the comps? Higher commissions, that's why--a higher purchase price means higher financing costs (profit for the banks) and higher commissions (profit for the selling agent), not to mention more profit for the homeowner. Then there's the tax man--he also uses these "intangibles" to assess property taxes (profit for the city or state).
Back to the marketing for a sec--what if those intangibles were to lose value right along with the house, or even INSTEAD of the house? What if a hip, trendy area is all of a sudden out of favor--do we continue to pay for what WAS, but is not any more? That could make for some expensive memories (and the housing markets are full of those) in terms of equity.
Judgments don't cost anything to make, so why should they cost anything to buy? You're making a judgment about a certain house in a certain area, in a certain condition, with certain amenities, so are you willing to bet on that judgment and buy at any price, or are you willing to bet based on what the nearest competition rated, based on something tangible like price per square foot, and discounting for the bad?
I'm no real estate expert, but you see my point.
This stuff is tantamount to corporate "goodwill" (which is worth what you believe it is), or even the cachet given to brand-name items. They are worth what you believe they are worth, and there's no hard-and-fast way to assess these things, so why even count them to begin with? These are M-A-R-K-E-T-I-N-G, plain and simple, and why should you pay for that?
Shouldn't the cost per square foot take those things into account before it gets assigned? Why must we add on another mystical amount for things that should be inherent in the comps? Higher commissions, that's why--a higher purchase price means higher financing costs (profit for the banks) and higher commissions (profit for the selling agent), not to mention more profit for the homeowner. Then there's the tax man--he also uses these "intangibles" to assess property taxes (profit for the city or state).
Back to the marketing for a sec--what if those intangibles were to lose value right along with the house, or even INSTEAD of the house? What if a hip, trendy area is all of a sudden out of favor--do we continue to pay for what WAS, but is not any more? That could make for some expensive memories (and the housing markets are full of those) in terms of equity.
Judgments don't cost anything to make, so why should they cost anything to buy? You're making a judgment about a certain house in a certain area, in a certain condition, with certain amenities, so are you willing to bet on that judgment and buy at any price, or are you willing to bet based on what the nearest competition rated, based on something tangible like price per square foot, and discounting for the bad?
I'm no real estate expert, but you see my point.
Tuesday, July 28, 2009
Wenchypoo's Health Care Proposal Update
I just sent a copy of my proposal to Ohio Rep. John Boehner, who is the House Minority Leader and represents a farm state--he's also the guy who ever so kindly reads aloud the amendments to bills on C-SPAN.
I doubt it will go anywhere, but I had to try.
I doubt it will go anywhere, but I had to try.
Tuesday, July 21, 2009
Wenchypoo's Health Care Proposal
Instead of over-taxing and not delivering, why not come up with an amount of money (virtually certain to be smaller than the billions or trillions to insure every living soul) to subsidize higher-quality foods, like fruits and vegetables--effectively putting cheap medicine directly into the hands of the people?
UPDATE: Also add visits with a dietician/nutritionist to help you put those more nutritious foods to work.
My personal choice for Health Czar, Michelle Obama, showed the world that SHE gets it by planting a garden! So why doesn't her husband?
Preventative care starts with a suitable diet for the particular illness or chronic disease one is trying to avoid or reverse, and most everything can be avoided or reversed with fresh, raw fruits and veggies added to the daily diet.
I'm sure John Boehner would approve, and probably countless other politicians--but then there are some who are obviously in this for the backdoor deals, hidden amendments, and personal agendas that have existed since the death of our Founding Fathers. Job security through political survival is a higher priority for some (probably so they can keep their health insurance).
My plan would serve three purposes:
1. Lessen the demand for health care by a doctor, dentist, or eye doctor.
2. Pay the farmers just like the current subsidies do, only they'd be paid for growing serious food we can all eat (not just the cows).
3. Put the power of beneficial foods in YOUR hands and under YOUR control.
I have no idea what amount of money this would take, but I do know that access to health care would become largely a matter of finding a parking spot (either at a doctor's office or outside a gym).
If we're going to have a universal health care system of any kind, let's make it one that actually deals with improving health, and not just fattens the tax coffers--subsidize fruits and veggies, subsidize nutritional counseling, and what the hell...gym memberships for everybody! Then we'll examine how badly this "universal coverage" is really needed, as well as the Big Pharma empire.
UPDATE: Also add visits with a dietician/nutritionist to help you put those more nutritious foods to work.
My personal choice for Health Czar, Michelle Obama, showed the world that SHE gets it by planting a garden! So why doesn't her husband?
Preventative care starts with a suitable diet for the particular illness or chronic disease one is trying to avoid or reverse, and most everything can be avoided or reversed with fresh, raw fruits and veggies added to the daily diet.
I'm sure John Boehner would approve, and probably countless other politicians--but then there are some who are obviously in this for the backdoor deals, hidden amendments, and personal agendas that have existed since the death of our Founding Fathers. Job security through political survival is a higher priority for some (probably so they can keep their health insurance).
My plan would serve three purposes:
1. Lessen the demand for health care by a doctor, dentist, or eye doctor.
2. Pay the farmers just like the current subsidies do, only they'd be paid for growing serious food we can all eat (not just the cows).
3. Put the power of beneficial foods in YOUR hands and under YOUR control.
I have no idea what amount of money this would take, but I do know that access to health care would become largely a matter of finding a parking spot (either at a doctor's office or outside a gym).
If we're going to have a universal health care system of any kind, let's make it one that actually deals with improving health, and not just fattens the tax coffers--subsidize fruits and veggies, subsidize nutritional counseling, and what the hell...gym memberships for everybody! Then we'll examine how badly this "universal coverage" is really needed, as well as the Big Pharma empire.
Sunday, July 19, 2009
Meet the New Boss—Ollie Garchy
Meet Ollie, or Oligarchy, as he’s formally known as.
What is an oligarchy? It’s a form of government in which all power is vested in a few persons or in a dominant class or clique; government by the few (according to Dictionary.com).
For those of you who haven’t been keeping up with the political and business goings-on, our country is becoming One Nation Under ACORN, Goldman-Sachs, G.E., AIG, and soon to be Wally-World.
Pretty much all power in this country, including utility power (and probably our personal power too), is being consolidated into a few key areas. This is steps 2 and 3 in the political career longevity path.
The consolidation has gotten so bad that our politicians are no longer reading legislation, sometimes not even completing the bill writing, before they go to vote on it. This is like trying to operate a nuke plant without so much as an instruction manual!
But this is what it takes to pass an unpopular agenda—an agenda so egregious, it would set back economic progress 50-100 years—in the name of social justice for a few. This is also what it takes to maintain power while making an end-run around Congress and the constitutionally-derived checks and balances created by our Founding Fathers.
Corruption has become art form. Now we all have to learn how to make this new art form function in our lives, or go mad fighting it. I don’t know about you, but I have the Loony Bin on speed-dial, and reservations have already been made for my eventual residence.
What really kills me (and probably you, too) is the fact that there are so many end-runs we ourselves can make to avoid suffering through a lot of this nonsense. If I, a lowly unemployed housewife, can come up with avoidance tactics, why can’t trained legal minds (like the ones in Congress or the White House) see them too?
But I digress…let’s get back to the Ollie part—businesses on their knees in front of the Oval Office. They obviously don’t see a way out for themselves without total collapse and/or destruction of the empires so carefully built to this day, so they’ve sold their souls (and their clientele) into “universal” and “green” captivity. The Ollies feel there is no other way to survive than to bend to Obama’s will and agenda, and do their best to carry it out—this was most recently evident with the announcement of Wally-World’s sustainability index creation and the re-vamping of their vendors to meet this index.
You ask me, I say this is smokescreen to get us away from the sudden reversal of Wally-World’s decision regarding acceptance of universal health care. Wally sees the writing on the wall: a government-paid public option would drastically reduce his own health insurance expenses per employee to more closely match his chief competitor, Target. To avoid proposed taxation of those benefits, he has switched horses in mid-stream, and changed from blue-vested yellow smiley faces to green and indexed to sustainability, in hopes of capturing idiots who have more dollars than sense, and chase after these marketing concepts. These “green” products that pass muster will also come with a higher profit margin to Wally (and higher prices to you)—haven’t you figured this out yet?
Another nail in the coffin: the bottoming of CIT Financial--de facto home of small business loans everywhere. No small business loans, no more retail business--and you can kiss Christmas shopping goodbye! Christmas merchandise ordering gets done this month, but without financing...well, you know. Now you get a better understanding of why Wally wants to go green--WE THE PEOPLE will become Wally's (and other retailers') new CIT Financial.
Wally, for one retailer, has lost its way. Providing value for the consumer is no longer profitable, in spite of all the technological, supply chain, and retail theory advances—it has all come back down to margin per unit. Going green is providing “political value” to the consumer instead, and at such a cost.
I’m sure it’s the same at the other Ollies, too—charging more per unit, providing less real value per unit, and tangibility is forever gone, replaced with intricate marketing maneuvers and clever language.
I’ve noticed that pretty much all Ollies are the same, including Congress and the states: they’re loathe to reduce spending to get it under revenue income, so they find ways to jack up the income (through increased and invented taxes, increased prices, less selection, smaller sizes, etc.) without thinking we would find ways to avoid paying the increases.
Ollie may think he’s clever, but we are too. I hope he has a backup plan in case his first gambit fails—and it will if I know the American spirit. If someone is stupid enough to stand and take it, then they get what they deserve.
How can we kill off Ollie? With votes. We…well, enough of us voted this disaster into office, and we can vote it out--one cast of characters at a time. As for the rest of Ollie, we can vote with out wallets and choose not to play their games. They’ll get the message, and shift accordingly or die off altogether.
When you think about it, have you ever seen an Ollie without a Kukula and Fran nearby? Take away Fran and Kukula, and Ollie doesn’t survive alone—he needs an audience. Take your cue and walk out on him, using your votes (both kinds).
UPDATE: Goldman-Sachs turns positive on G.E.--go figure!
What is an oligarchy? It’s a form of government in which all power is vested in a few persons or in a dominant class or clique; government by the few (according to Dictionary.com).
For those of you who haven’t been keeping up with the political and business goings-on, our country is becoming One Nation Under ACORN, Goldman-Sachs, G.E., AIG, and soon to be Wally-World.
Pretty much all power in this country, including utility power (and probably our personal power too), is being consolidated into a few key areas. This is steps 2 and 3 in the political career longevity path.
The consolidation has gotten so bad that our politicians are no longer reading legislation, sometimes not even completing the bill writing, before they go to vote on it. This is like trying to operate a nuke plant without so much as an instruction manual!
But this is what it takes to pass an unpopular agenda—an agenda so egregious, it would set back economic progress 50-100 years—in the name of social justice for a few. This is also what it takes to maintain power while making an end-run around Congress and the constitutionally-derived checks and balances created by our Founding Fathers.
Corruption has become art form. Now we all have to learn how to make this new art form function in our lives, or go mad fighting it. I don’t know about you, but I have the Loony Bin on speed-dial, and reservations have already been made for my eventual residence.
What really kills me (and probably you, too) is the fact that there are so many end-runs we ourselves can make to avoid suffering through a lot of this nonsense. If I, a lowly unemployed housewife, can come up with avoidance tactics, why can’t trained legal minds (like the ones in Congress or the White House) see them too?
But I digress…let’s get back to the Ollie part—businesses on their knees in front of the Oval Office. They obviously don’t see a way out for themselves without total collapse and/or destruction of the empires so carefully built to this day, so they’ve sold their souls (and their clientele) into “universal” and “green” captivity. The Ollies feel there is no other way to survive than to bend to Obama’s will and agenda, and do their best to carry it out—this was most recently evident with the announcement of Wally-World’s sustainability index creation and the re-vamping of their vendors to meet this index.
You ask me, I say this is smokescreen to get us away from the sudden reversal of Wally-World’s decision regarding acceptance of universal health care. Wally sees the writing on the wall: a government-paid public option would drastically reduce his own health insurance expenses per employee to more closely match his chief competitor, Target. To avoid proposed taxation of those benefits, he has switched horses in mid-stream, and changed from blue-vested yellow smiley faces to green and indexed to sustainability, in hopes of capturing idiots who have more dollars than sense, and chase after these marketing concepts. These “green” products that pass muster will also come with a higher profit margin to Wally (and higher prices to you)—haven’t you figured this out yet?
Another nail in the coffin: the bottoming of CIT Financial--de facto home of small business loans everywhere. No small business loans, no more retail business--and you can kiss Christmas shopping goodbye! Christmas merchandise ordering gets done this month, but without financing...well, you know. Now you get a better understanding of why Wally wants to go green--WE THE PEOPLE will become Wally's (and other retailers') new CIT Financial.
Wally, for one retailer, has lost its way. Providing value for the consumer is no longer profitable, in spite of all the technological, supply chain, and retail theory advances—it has all come back down to margin per unit. Going green is providing “political value” to the consumer instead, and at such a cost.
I’m sure it’s the same at the other Ollies, too—charging more per unit, providing less real value per unit, and tangibility is forever gone, replaced with intricate marketing maneuvers and clever language.
I’ve noticed that pretty much all Ollies are the same, including Congress and the states: they’re loathe to reduce spending to get it under revenue income, so they find ways to jack up the income (through increased and invented taxes, increased prices, less selection, smaller sizes, etc.) without thinking we would find ways to avoid paying the increases.
Ollie may think he’s clever, but we are too. I hope he has a backup plan in case his first gambit fails—and it will if I know the American spirit. If someone is stupid enough to stand and take it, then they get what they deserve.
How can we kill off Ollie? With votes. We…well, enough of us voted this disaster into office, and we can vote it out--one cast of characters at a time. As for the rest of Ollie, we can vote with out wallets and choose not to play their games. They’ll get the message, and shift accordingly or die off altogether.
When you think about it, have you ever seen an Ollie without a Kukula and Fran nearby? Take away Fran and Kukula, and Ollie doesn’t survive alone—he needs an audience. Take your cue and walk out on him, using your votes (both kinds).
UPDATE: Goldman-Sachs turns positive on G.E.--go figure!
Tuesday, July 14, 2009
House Price Per Unit Update Again
After discussing the "tax assessments as loan maximums" with my agent, she made some calls, and it turns out that ONLY MY CREDIT UNION is doing this in my area--for their risk safety's sake, I guess. I personally don't see the need to pay more than the tax assessment for a house, but then again, this would be "tax-free house" to you as long as the house market value is higher than the tax assessment.
If the comps justify the asking price, and the tax assessment is lower, you have what's called "tax equity"--this also means that you have room for your property taxes to be raised, and you betcha they'll go up in this day and age.
However, if the opposite is true--tax assessments are HIGHER than comps--then you have room to protest the property taxes.
If the comps justify the asking price, and the tax assessment is lower, you have what's called "tax equity"--this also means that you have room for your property taxes to be raised, and you betcha they'll go up in this day and age.
However, if the opposite is true--tax assessments are HIGHER than comps--then you have room to protest the property taxes.
Sunday, July 12, 2009
Updates to Buying Houses At Price Per Unit
I spoke to my buyer's agent yesterday, and she said to also take the time the house has been on the market into consideration--if the house has been on the market over 90 days, and it's just a thousand or two (or maybe 5) outside your range, chances are you can make an offer anyway, and it gets accepted. You may hear uproarious laughter, or wailing tears, when the homeowner realizes just how much his/her home is REALLY worth to a serious buyer.
The bottom line is: people (or banks) don't want these houses. All you can do is try.
We're going out Monday and touring three houses, and I have about four more on the back burner awaiting a small comp drop. I also noticed some houses in my area that've all of a sudden dropped as much as $20k in price--maybe they read my article. Maybe they read my dramatic expounding on Zillow. I don't care--somebody got the message!
Things may get real interesting after Labor Day, I do believe. We frugalites buy our coats in June, our shorts in January, and go Christmas shopping right after Christmas, so why not go house shopping after the season's over (approximately Easter-Labor Day)? This is why I'm building a back-burner pile of listings for when the true sales start.
UPDATE #2: I got into a conversation about real estate prices with a bank officer (I had gone to the bank on a totally unrelated matter--we were waiting on a fax, and got to talking), and she let slip that the banks won't finance anything above and beyond last year's tax assessment. So now I have two benchmarks to go by: comps for approximate market value, and tax assessments for maximum loan amount.
Once the owners and agents learn about this, I imagine a whole new wave of price-lowering is going to happen! Off i go to Zillow to announce it.
The tax records should be available online for free--check Google. If not, a visit to the courthouse with a list of properties is definitely worthwhile. All you need is the street address and zip, not the "legal" address. These are public records.
The bottom line is: people (or banks) don't want these houses. All you can do is try.
We're going out Monday and touring three houses, and I have about four more on the back burner awaiting a small comp drop. I also noticed some houses in my area that've all of a sudden dropped as much as $20k in price--maybe they read my article. Maybe they read my dramatic expounding on Zillow. I don't care--somebody got the message!
Things may get real interesting after Labor Day, I do believe. We frugalites buy our coats in June, our shorts in January, and go Christmas shopping right after Christmas, so why not go house shopping after the season's over (approximately Easter-Labor Day)? This is why I'm building a back-burner pile of listings for when the true sales start.
UPDATE #2: I got into a conversation about real estate prices with a bank officer (I had gone to the bank on a totally unrelated matter--we were waiting on a fax, and got to talking), and she let slip that the banks won't finance anything above and beyond last year's tax assessment. So now I have two benchmarks to go by: comps for approximate market value, and tax assessments for maximum loan amount.
Once the owners and agents learn about this, I imagine a whole new wave of price-lowering is going to happen! Off i go to Zillow to announce it.
The tax records should be available online for free--check Google. If not, a visit to the courthouse with a list of properties is definitely worthwhile. All you need is the street address and zip, not the "legal" address. These are public records.
Friday, July 10, 2009
Lighter Meals May Mean Longer Life
From HealthDay News. Hey, hey we're the monkeys...with caloric restriction.
When someone comes up with a scale that measures calories, I'll start measuring them--until then, I feel I do enough weighing, measuring, and sub-dividing in the kitchen as it is. This would be like taking it to a microscopic level.
UPDATE: I just found this--CRON (Calorie Restriction with Optimal Nutrition) and Easy CRON.
It's not like I eat junk food or heavily-caloried foods, or anything. From all that I've learned over the years, vegetation is the least-caloried food, and the more you eat, the less you have to worry about it. But then, there's that pesky meat and dairy...most protein, most cholesterol-forming, most caloric (other than fat itself), and hard to get a meat-and-cheese-lover husband to cut back his daily intake. Besides, they're about the only protein sources he ISN'T allergic to!
This is why we eat a truckload of veggies every week to offset our meat intake...but then, there's the output.
I sense a discussion this afternoon when Hubby comes home.
On another note: who needs health care when (once again) food can be your medicine?
When someone comes up with a scale that measures calories, I'll start measuring them--until then, I feel I do enough weighing, measuring, and sub-dividing in the kitchen as it is. This would be like taking it to a microscopic level.
UPDATE: I just found this--CRON (Calorie Restriction with Optimal Nutrition) and Easy CRON.
It's not like I eat junk food or heavily-caloried foods, or anything. From all that I've learned over the years, vegetation is the least-caloried food, and the more you eat, the less you have to worry about it. But then, there's that pesky meat and dairy...most protein, most cholesterol-forming, most caloric (other than fat itself), and hard to get a meat-and-cheese-lover husband to cut back his daily intake. Besides, they're about the only protein sources he ISN'T allergic to!
This is why we eat a truckload of veggies every week to offset our meat intake...but then, there's the output.
I sense a discussion this afternoon when Hubby comes home.
On another note: who needs health care when (once again) food can be your medicine?
Wednesday, July 08, 2009
Buying Houses at Price-Per-Unit
I may be slow, but I finally figured it out: how to buy a house at price per unit, just like I buy my groceries.
No, I haven't actually bought the house yet, but I have several good candidates lined up.
Normally, people look at what a real estate agent or MLS has to offer, and go by the list price or asking price--this is the same as the shelf price in a grocery store. Smart shoppers don't look at this price, do they?
Smart shoppers look at price per unit, or how much this particular product costs compared to others in the same category. Prices per unit can be expressed in ounces, pounds, quarts, gallons, or even liters.
Prices per unit on houses are expressed in square feet.
We buy our groceries by the pound, the ounce, the number of loads, or even cost per serving, and we always check NADA or Kelley Blue Book before buying a car, so why aren't we buying our houses in the same way? This information is readily available to the public on Zillow. Agents will tell you that Zillow isn't accurate, but it is within a $5k +/- range of what a house is truly worth on the open market, which can be drastically different from the asking price.
I've seen some real lulus on my local MLS (multi-listing service)--houses overpriced by as much as $80k, and have been on the market for almost a year. Some have been sitting for over a year, and are STILL overpriced!
Where is the agent, and why haven't they had a heart-to-heart with the homeowner about correctly pricing the house closer to local comps? Where is the homeowner who wonders why the house hasn't sold? Where is the bank sitting on an overpriced foreclosure clogging up the market, preventing them from adding new offerings to the MLS?
I shake my head and continue to find houses listed in my area at an enormous "shelf price", yet I run them through Zillow, and find them quite affordable according to comps.
You are probably wondering why this is such a big deal to me--because houses aren't selling as quickly as they should, and for the reason I just described: these houses are overpriced, and bank appraisers cannot justify the asking prices, so banks won't loan money to buy these houses. They will loan up to comp value, but no more--anything more would be a risk, especially in this employment environment. The good old days of loaning 125% of value are long gone.
Maybe if we started expressing house prices in price-per-square foot rather than just an arbitrary number based on what is owed, or what is expected to come in after renovations are done, more houses would move, and it would be a darn sight easier to spot affordable ones. Then, it would be easier to stick to a "budget" by knowing how much home you could afford--LITERALLY! This would be a far better indicator than the banks, who don't take expenses into account when determining how much you can borrow for a house.
Now, back to Zillow for just a moment: you may be wondering just how to use Zillow as your aid in finding a home. Let's try an example (I'll pull one from my area):
845 Norman Ave., 23518--asking price is $165k. The house is a non-descript Cape Cod style, 862 square feet, and has 2 bedrooms and 1 bath, a detached 2-car garage, all kitchen appliances except a dishwasher (a luxury here because of narrow pipes), central heat/air, gas water heater, tile and wood floors, and is fenced in back. It's been on the market for about 20 days.
Now we go to Zillow and enter the address, then click on the house in question (it will come up in a bubble in the center of a map). Then we look over at the right margin of the screen (How This Home Stacks Up) where it lists price per square foot in that area. Multiply the price per square foot with the number of square feet in the house, and you get the true market value of the house in question.
If no data comes up, try the house number right next door--just make sure it has the same number of bedrooms and baths, same number of stories, and same (or roughly equivalent) amenities. This won't be dead accurate, but it will give a ballpark of a ballpark.
Back to 845 Norman Ave.--asking price $165k, and 862 square feet. Zillow's price per square foot in this neighborhood is $130, so 130 x 862 = $112,060 or rounded down to $112 even. This is the market price, +/- 5K, for the house on Norman St. So the range for comps is $107-117K, far below what the asking price is. Someone needs to have a chat with the owner!
Assuming I put in an offer of $112, and it gets accepted, I will have successfully spanked the owner for $53k--that's a $53,000 savings that I won't have to finance, pay taxes on, or insure.
This is how I put the power of market value to work for me--knowing what something's worth, and not paying a penny over the market value. I also have other tales of saving money.
Remember the formula: Zillow price per square foot x house square foot size = true market value +/- $5k
With houses, as with groceries and cars, sticker price means nothing. People want money out of them, either for equity, some distorted notion of what renovations are worth, some distorted notion of what location is worth (based on some 20-year old information), or because they themselves bought at too high a price, and now can't afford to keep it.
If you want to buy a house at a realistic price, a realistic value, and want a realistic chance of getting financing on it, go the Zillow price-per-square-foot route.
Just for fun, try this with your own house just to see what it's currently worth, and how much equity you gained or lost.
Some day...some day, I'll come up with a way to buy cars at cost per unit, but for now, all we have that I'm aware of is cost of ownership. I'd like to find a formula that'll help BEFORE you buy the car!
UPDATE: I did find this today.
No, I haven't actually bought the house yet, but I have several good candidates lined up.
Normally, people look at what a real estate agent or MLS has to offer, and go by the list price or asking price--this is the same as the shelf price in a grocery store. Smart shoppers don't look at this price, do they?
Smart shoppers look at price per unit, or how much this particular product costs compared to others in the same category. Prices per unit can be expressed in ounces, pounds, quarts, gallons, or even liters.
Prices per unit on houses are expressed in square feet.
We buy our groceries by the pound, the ounce, the number of loads, or even cost per serving, and we always check NADA or Kelley Blue Book before buying a car, so why aren't we buying our houses in the same way? This information is readily available to the public on Zillow. Agents will tell you that Zillow isn't accurate, but it is within a $5k +/- range of what a house is truly worth on the open market, which can be drastically different from the asking price.
I've seen some real lulus on my local MLS (multi-listing service)--houses overpriced by as much as $80k, and have been on the market for almost a year. Some have been sitting for over a year, and are STILL overpriced!
Where is the agent, and why haven't they had a heart-to-heart with the homeowner about correctly pricing the house closer to local comps? Where is the homeowner who wonders why the house hasn't sold? Where is the bank sitting on an overpriced foreclosure clogging up the market, preventing them from adding new offerings to the MLS?
I shake my head and continue to find houses listed in my area at an enormous "shelf price", yet I run them through Zillow, and find them quite affordable according to comps.
You are probably wondering why this is such a big deal to me--because houses aren't selling as quickly as they should, and for the reason I just described: these houses are overpriced, and bank appraisers cannot justify the asking prices, so banks won't loan money to buy these houses. They will loan up to comp value, but no more--anything more would be a risk, especially in this employment environment. The good old days of loaning 125% of value are long gone.
Maybe if we started expressing house prices in price-per-square foot rather than just an arbitrary number based on what is owed, or what is expected to come in after renovations are done, more houses would move, and it would be a darn sight easier to spot affordable ones. Then, it would be easier to stick to a "budget" by knowing how much home you could afford--LITERALLY! This would be a far better indicator than the banks, who don't take expenses into account when determining how much you can borrow for a house.
Now, back to Zillow for just a moment: you may be wondering just how to use Zillow as your aid in finding a home. Let's try an example (I'll pull one from my area):
845 Norman Ave., 23518--asking price is $165k. The house is a non-descript Cape Cod style, 862 square feet, and has 2 bedrooms and 1 bath, a detached 2-car garage, all kitchen appliances except a dishwasher (a luxury here because of narrow pipes), central heat/air, gas water heater, tile and wood floors, and is fenced in back. It's been on the market for about 20 days.
Now we go to Zillow and enter the address, then click on the house in question (it will come up in a bubble in the center of a map). Then we look over at the right margin of the screen (How This Home Stacks Up) where it lists price per square foot in that area. Multiply the price per square foot with the number of square feet in the house, and you get the true market value of the house in question.
If no data comes up, try the house number right next door--just make sure it has the same number of bedrooms and baths, same number of stories, and same (or roughly equivalent) amenities. This won't be dead accurate, but it will give a ballpark of a ballpark.
Back to 845 Norman Ave.--asking price $165k, and 862 square feet. Zillow's price per square foot in this neighborhood is $130, so 130 x 862 = $112,060 or rounded down to $112 even. This is the market price, +/- 5K, for the house on Norman St. So the range for comps is $107-117K, far below what the asking price is. Someone needs to have a chat with the owner!
Assuming I put in an offer of $112, and it gets accepted, I will have successfully spanked the owner for $53k--that's a $53,000 savings that I won't have to finance, pay taxes on, or insure.
This is how I put the power of market value to work for me--knowing what something's worth, and not paying a penny over the market value. I also have other tales of saving money.
Remember the formula: Zillow price per square foot x house square foot size = true market value +/- $5k
With houses, as with groceries and cars, sticker price means nothing. People want money out of them, either for equity, some distorted notion of what renovations are worth, some distorted notion of what location is worth (based on some 20-year old information), or because they themselves bought at too high a price, and now can't afford to keep it.
If you want to buy a house at a realistic price, a realistic value, and want a realistic chance of getting financing on it, go the Zillow price-per-square-foot route.
Just for fun, try this with your own house just to see what it's currently worth, and how much equity you gained or lost.
Some day...some day, I'll come up with a way to buy cars at cost per unit, but for now, all we have that I'm aware of is cost of ownership. I'd like to find a formula that'll help BEFORE you buy the car!
UPDATE: I did find this today.
Monday, July 06, 2009
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