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If you actually do have a credit history, here are three mistakes you can make with your credit that will hurt your credit score:

Increase Your Credit Score – Avoid Mistake #3
Trying to get too much credit, too fast – Every time you apply for new credit, it generates what’s referred to in the credit industry as a “hard pull” on your credit report. A hard pull is an indication that a prospective creditor pulled your credit report. A hard pull does adversely affect your credit. You can also get a “soft pull”, such as when an existing creditor is checking up on you, or if you check you own credit. These inquires have no adverse impact on your credit score. In fact, they aren’t even visible on your credit report.

Hard pulls, a different story. Too many hard pulls in too short of a time will send your score plunging lower. Each hard pull will lower your credit score by approximately 5 points. You can see how a trip to the mall could cost you 25 points in a single day if you’re tempted by those “Just fill out this application and you’ll save 5%” offers. It could cost you way more than that when if your FICO score drops. The good news is that in about 6 months the credit ding will be gone. Try to limit your new credit applications to those you really need, such as for a mortgage or an auto loan.

Increase Your Credit Score – Avoid Mistake #2
Improper credit utilization – That doesn’t mean don’t use your credit card to purchase round trip tickets to London and a new Tag Heuer for the missus. “Utilization” is a credit industry term that indicates the percentage of your revolving credit you are currently taking advantage of. If, for example, you have credit cards with limits totaling $20,000, and currently have balances on the cards totaling $15,000, you have a revolving utilization score of 75%. Not too good! That’s why you should keep credit accounts open when you pay off the balances. Closing the accounts will adversely affect your credit utilization scores. In addition, after 7 years that card will no longer appear on your credit report. A card that has no balance and reads “pays as agreed” on your report helps your credit score.

Increase Your Credit Score – Avoid Mistake #1
No surprise here. The one thing you absolutely, positively must avoid to increase your credit score, or more accurately prevent its deterioration, is have no late payments. Payments over 30 days late are devastating to your hard earned credit score. The frequency, recency and severity all come into play when your credit score is calculated. Each has different statistical weighting according to a complex formula derived by the credit reporting agencies. They’ve found that each of these affects you credit worthiness differently.  Recent late payments, those in the last 24 months, count against you much more that a late payment you made 5 years ago. The same goes to the frequency of your late payments. If you were late once last year, it will hurt, not the same as if you are a habitual offender. If you are one who always pays over 30 days late, even if you always eventually pay, you are costing yourself a ton of money. Stop it! The severity indicates how late your payments were. Anything over 30 days late is bad, but stretch a late payment to over 90 days, and you’re in deep trouble credit score wise.

Avoiding these 3 credit score killing mistakes is a necessity. Keeping your credit score high will save you money on every credit purchase. That goes for that portable DVD player you got on Sale at Best Buy for $99, to your mortgage. As an example, current mortgage interest rates for creditors with FICO scores over 760 average 5.78%. Slip just a bit, to a still good credit score of 759, and you’ll be paying an interest rate of 6.002%. That seemingly insignificant increase could end up costing you plenty. With a 6% mortgage, you’ll pay about $1,500 a month and $289,000 in interest over the life of a 30 year mortgage. Drop your interest payment to the 5.78% figure and your payment drops to $1,463 a month. Moreover, you’ll only (!!) pay $277,000 in interest over the term of the loan. That one credit score point could cost you $12,000 in interest payments over 30 years. Drop under 700 and your interest rate will climb to 6.286%, with a commensurate monthly payment on the same $250,000 mortgage of $1,545.

Remember, avoid the mistakes and keep you credit score high and your payments low!

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Traditionally, a cooling in the SFR market market has precipitated an increase in the apartment market. The market decline will probably only be accelerated by the recent troubles in the sub-prime mortgage market, which can only serve to thin the number of available buyers for single family residences. Might there be other reasons to investigate REITs as a comfortable resiting place for some of your portfolio? Well, just as a slump in the single family residential market may foreshadow a rise in the multi-family rental market, REITs have traditionally trailed the broader market in terms of appreciation.

REITs are, however, a fairly new instrument. The combination of factors we are experiencing today has yet to be experienced since the large variety of REITs that are now available have come into the marketplace. In New York City for example, apartment rents have actually increased for the first 4 months of 2007, with 2 bedroom units showing the strongest performance. This would lend credence to the supposition, in New York at least, that the apartment market will gain strength as home buyers are shut out of the market or must sell as their ARMs adjust upward.

In Phoenix, another once hot SFR real estate market, rents are up almost 5% over last year as some home buyers look to rent, rather than buy. According to RealFacts, the average apartment rent in the metro Phoenix area rose from $771 last year to $805 this year, clearly out pacing general inflation. There is also upward pressure on rental rates because investors are snapping up apartment complexes, then making improvements and raising rents to recoup their investment. Some investors make improvements with an eye toward future condo conversions. Although the trend toward condo conversions appears to be over for the present time, it isn't out of the question for the not to distant future.

Further west, in California's LA and Orange counties, apartment rental prices are up even more, an average of 7.2% over the same time last year. If you're looking to rent an apartment further north, say in San Jose, you'll fork out 12.1% more than last year for the same apartment. Still further north, in Seattle, be prepared to reach into your pocket for over 9% more cash every month than last year.

Rents are rising, what about available product on the market for renter to rent? Nationwide, there looks to be a large number of available units. The apartment vacancy rate stood at 6.1% for the first quarter of this year, the highest in almost 24 months. Part of the increase is due to the tightening in the sub-prime mortgage industry. The same pressure that's preventing people form buying homes and forcing them into the rental market is also putting rental inventory into the market, as buyers are unable to sell homes and condos. They are forced therefore, to put them up for rent or lose them to foreclosure. It's a relatively good time to make this choice for home owners, due to the rising rental rates in many major metro markets.

Well, do all these factors make it a good time to put your investment dollars into apartment oriented REITs? It depends. Generally, rising rents bode well for the market. On the other hand, increasing apartment vacancy rates do not. South Florida is especially poor in terms of increasing vacancy rates due to the number of condo projects that are now being converted to high end apartments, because of the condo market collapse there. The CREA REIT Review, a paper devoted to REITs (what else?) indicates that while apartment rental rates are rising, the rate of growth has leveled off. It also notes that while REITs in general have had strong performances recently, apartment oriented REITs have trailed the broader REIT market.

 
In fact, a Bloomberg index of 19 apartment oriented REITs showed a substantial 14% decline for the first quarter of this year. CREA recommends focusing REIT investment strategy on high barrier, coastal real estate markets that are earlier in their recovery cycle, such as Seattle and Northern California. As with any other investment, there are some nice, golden eggs to be found, but you must tear apart a few geese to find them. Go get your gloves.

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It also shows why using movies as an investment guide may not be the best strategy. If you recently enjoyed the 1991 film “Other People’s Money” with Danny DeVito and Gregory Peck, you may have been convinced that dumping any connection to the metal in your investment portfolio would have been prudent. That would have been a mistake.

Fiber optics not withstanding, CU has had an excellent performance of late, due mostly to the increased demand from China and India. Partly because these nations are installing new cabling for power, telephone and data networks at a prodigious rate, there has at times been less than 1 days worth of refined copper in the hopper. That accounts for a good portion of the rise in copper from about $1.30 24 months ago to $3.30 today.

That’s all well and good, but is copper an anomaly? After all, wire and cable is produced mostly using copper, not pork bellies or wheat. Are other commodities poised to make similar gains? In part, yes they are. It’s all part of the law of supply and demand. Materials with finite production capacity will rise in price as their relative scarcity increases. In time the increase in price will cause a rise in production. Some commodities, however, are more difficult to increase production of. In addition, the demand for some are rising faster than others and this trend will actually increase.

Your goal as an investor is to determine which commodity will be most affected by such trends and capitalize upon them. The price of oil may well continue to increase, but the volatility instilled by geopolitical events frightens many investors. What then of other commodities? If you’re investing primarily on futures, grain and soybeans imports by China have been rising rather dramatically for the past 5 years.

This trend looks to continue as their standard of living rises. A paper produced in late 2004 by Tuan, Fang and Cao points to the increased importation of soybeans into China for some time to come. The Chinese production of soybeans will probably not be able to keep pace, partly because the amount of arable land in China that’s devoted to corn production, considered a more important crop. As other nations devote more of their arable land to corn production in an effort to supply the ethanol being used as a substitute for oil, this may well be the same there as well.

What about other metals? Surely copper isn’t the only metal required to ensure economic growth. No, it’s not. Uranium, used in the production of nuclear power, has almost doubled in price since December. In 2005 it increased in price 76%. As fears of a disruption in the oil markets caused by tensions in the Middle East fail to dissipate, this trend may continue as well. U.S. nuclear power plants are now operating at over 90% capacity, compared to just over 50% 20 years ago. If no new plants are built, there may be little room for increased uranium demand from the U.S. What about other countries? Even with the demand in the U.S. possibly reaching a peak, there just isn’t a large supply of Uranium around. Uranium mines just don’t produce enough. Over ¼ of the uranium on the world market actually comes from recycled Russian missile warheads! They had about 10,000 of the things, but what happens when they’ve all been dismantled?

Uranium futures haven’t been an easy investment, even with the recent price increases. The radioactive metal hasn’t been traded on a formal commodities exchange as are other metals. The price was set by a few private business organizations. This just changed, as of early this month, when Uranium futures began to be traded on the NY mercantile exchange (NYMEX). To buy futures of the stuff, you need to go to the merc.

As with other investments the key to commodities is having accurate, timely information, and alot of it. Do your research. Look at global trends. Find out about production capacity, existing, under construction and planned. Look at existing and pending legislation that can affect the delivery and/or supply of certain materials. Look at the stock market to see what industries may demand what materials. Where are populations growing, and what are they demanding. Look closely at China and India. What will they be using in the future, both near and far?

As with any investment, commodities entail substantial risk. Your job is to mitigate those risks, get yourself debt free (unless you’re investing on margin) and build a healthy financial future. Have a great (for those of you in the States, long) weekend.

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Posted by debtblog at 02:25 PM | Permalink | Comments (0) | TrackBacks (0)

“How can you make a small fortune in racing? Start with a large one.” - Unknown
“A full purse never lacks friends” - Chinese proverb
“The great question is not weather you have failed, but weather you are content with failure” - Chinese proverb

“I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over. “ - Warren Buffett
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years. “ - Warren Buffett

“Good management consists in showing average people how to do the work of superior people. “ - John D. Rockefeller
“I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature. “ - John D. Rockefeller
“I would rather earn 1% off a 100 people's efforts than 100% of my own efforts. “ - John D. Rockefeller

“People who are unable to motivate themselves must be content with mediocrity, no matter how impressive their other talents. “ - Andrew Carnegie
“No person will make a great business who wants to do it all himself or get all the credit. “ - Andrew Carnegie

“When you innovate, you've got to be prepared for everyone telling you you're nuts. “ - Larry Ellison

“A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large. “ - Henry Ford
“Before everything else, getting ready is the secret of success. “ - Henry Ford

“Even if you fall on your face, you're still moving forward. “ - Victor Kiam
“Information is a negotiator's greatest weapon. “ - Victor Kiam
“You can hype a questionable product for a little while, but you'll never build an enduring business. “ - Victor Kiam

“Going to work for a large company is like getting on a train. Are you going sixty miles an hour or is the train going sixty miles an hour and you're just sitting still? “ - J. Paul Getty
“If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem. “ - J. Paul Getty
“No one can possibly achieve any real and lasting success or "get rich" in business by being a conformist. “ - J. Paul Getty

“People want to build new circuits around the world and they say: 'We'll come to Silverstone and have a look how it's done', and I tell them to stay away. “ Bernie Ecclestone

“Good will is the one and only asset that competition cannot undersell or destroy. “ - Marshall Field
“A man with a surplus can control circumstances, but a man without a surplus is controlled by them, and often has no opportunity to exercise judgment. “ - Marshall Field
and perhaps Marshall's most famous quote: “Right or wrong, the customer is always right”

“An overburdened, overstretched executive is the best executive, because he or she doesn't have the time to meddle, to deal in trivia, to bother people. “ - Jack Welch
“Control your own destiny or someone else will. “ - Jack Welch
“The essence of competitiveness is liberated when we make people believe that what they think and do is important - and then get out of their way while they do it. “ Jack Welch
“The Internet is the Viagra of big business. “ - Jack Welch

“Be a yardstick of quality. Some people aren't used to an environment where excellence is expected. “ - Steve Jobs
“Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations. “ - Steve Jobs

“Hey, I never told anyone to buy my stock! Besides, no one is less happy than I am with the performance of Microsoft stock! I've lost tens of billions of dollars this year-if you check, you'll see that that's more than most people make in a lifetime! “ William Gates III
“640K ought to be enough for anybody. “ - William Gates III
“I believe that if you show people the problems and you show them the solutions they will be moved to act. “ - William Gates III - Note: This is the true essence of marketing.

“I'm sorry that we have to have a Washington presence. We thrived during our first 16 years without any of this. I never made a political visit to Washington and we had no people here. It wasn't on our radar screen. We were just making great software. “ - William Gates III

“You look for stars. You look for the makeup of artists who can have long lasting careers and who could be headliners. “ - Clive Davis - Note: Apply this to any prospective employee of your organization
“You've got to seize the opportunity if it is presented to you. “ - Clive Davis

Apply these to your life and business in your quest for success and financial security. Some of these great bits of wisdom can be readily applied to other areas as well.

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Posted by debtblog at 01:48 PM | Permalink | Comments (0) | TrackBacks (0)

What does this this mean for you? Well, for one thing, it's becoming less affordable for the first time home buyer, and not just because of inflation induced price increases. There is simply not as much housing inventory in the class of typically desired by these buyers. How many first time buyers really need 4 bedrooms and three baths with a den and bonus room? Probably not too many. As the trend toward what the greenies term unsustainability (sustainability is a subject for a whole other debate) shows no sign of letting up, it means that getting into your first home is more important now than ever, lest you be either priced out of the market, or forced into an, ah, questionable mortgage. In some metro areas it's probably already too late, unless you actually studied hard in school, and availed yourself of that investment banking opportunity at Uncle Harold's office.

If you are already into a home, be aware what new home buyers are now looking for when you evaluate remodel projects with an eye toward future value enhancement. When it finally comes time time to part with your abode, you'll be competing in the marketplace with these newer homes, large and loaded (the home, not you after watching a football game).

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Posted by debtblog at 01:59 PM | Permalink | Comments (0) | TrackBacks (0)

Bad Credit Mortgage Option – The 2/28 ARM
Chances are one of the first options your mortgage broker will trot out for you is something called a 2/28 ARM. This is an adjustable rate mortgage whose interest rate is fixed for the first 2 years (the number before the slash in ARM notation is always the number of years for which the interest rate is fixed), then adjusts upward according to an index. The interest rate you’ll pay is the index rate plus what’s called a margin. Make sure you’re well aware of what that is and how it will affect your future payments.

2/28 ARMs usually have a  2 year prepayment penalty, meaning you’ll be unable to refinance for the first 24 months of the loan without paying a stiff one to the lender. That’s probably okay, as you’ll use this time to rebuild your credit so you’re able to qualify for a better loan. The prepayment penalty can make a huge difference in how you proceed in the future however, so it’s vital to verify the terms of the penalty, if it exists.

2/28 ARMs are known in the industry as ‘B’ paper loans, denoting their lower credit requirements than ‘A’ paper loans. Something to watch for with this, or any ARM, but especially those targeted at the sub-prime market is the interest rate cap. They can be quite high, and if you keep this mortgage beyond the initial 2 years, you could (and probably will) see the monthly payment escalate substantially, especially if the indices used by lenders , such as the FED prime rate or LIBOR, continue to rise.

Bad Credit Mortgage Option – FHA loan
If you have a history of poor credit, but are on your way to recovery, you may be able to take advantage of the FHA loan. The FHA loan is a fixed rate mortgage. FHA loans are federally insured, reducing the risk to the lender and allowing the homebuyer to get a mortgage they would perhaps be unable to qualify for. This program was started by the federal government in 1934 to help would-be homeowners stung by the Great Depression. FHA stands for Federal Housing Administration. It’s part of an even larger government agency (there are so many), the Dept. of Housing and Urban Development (HUD).

The FHA is attractive for first time homebuyers due to the low down payment of 3%. FHA loans are also available for manufactured homes and mobile homes. The credit requirements of FHA loans are somewhat more relaxed than the requirements for a normal mortgage. You need a stable income and employment history for the past two years. If you’ve had a bankruptcy, it must be at least 2 years since the discharge date and a foreclosure must be at least 3 years behind you. You must have fewer than 2 30 day late payments in the previous 2 years.

In some areas of the country an FHA loan will be unable to secure a home for you, due to the 30% mortgage payment / income guideline. If you make $60,000 annually, you’ll be looking at a house payment of $1,500/ month. If you live in Boston, New York, Seattle or LA, that’s a stretch for a 3 bedroom / 2 bath home. In these and some other locales, such homes are typically well over $300,000. (in King County Washington for example, only 14% of homes on the market are less than $300,000). That’s great if you bought one a few years ago, not so good if you’re looking to get into such a home now.
 

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First of all, before the roasting, Kudos to Apple for offering consumers a choice in quality levels in the first place, and allowing DRM free music downloads. DRM free downloads, with greater device compatibility, from iTunes has been a quest of many consumers for a long time.

The problem lies with Apple’s claim their new AAC music downloads at a 256k bit rate have, as their website proclaims, “audio quality indistinguishable from the original recording”. Now that may be true whilst one is listening on the pint sized ear buds typically used with an iPOD, but I’m sure many in the audio/video and recording industries would argue is not the case on a high quality home audio system. Apple’s claim is misleading in the extreme. For those of you unversed in such matters, standard CDs (using what’s known as the “Red Book” standard) have a bit rate of 1,411.2 kbps. No matter how good the compression algorithm is, and AAC is a good one, something’s missing from the picture at 256k.

Apple may be forgiven for such transgressions if their statements contained a grain of truth, but there actually are high resolution audio formats on the market, and they are not just high resolution, but multi-channel as well. In this vein, Sony and Philips gave us the Super Audio CD (SACD), and it really sounded fantastic. There is also the DVD-Audio format, a competitor to SACD (won’t the A/V industry ever learn consumers want a single format they can support?) that basically uses the entire data storage capability of a DVD to store audio only, instead of audio and video.

More recently, for motion picture soundtracks, and presumably music videos, video sound stalwarts Dolby Labs and DTS have brought us Dolby Digital HD, Dolby Digital Plus, and DTS-HD. These are truly high resolution digital audio formats. Amazingly, these true high resolution audio formats don’t use a 256k bit rate!! Maybe they can learn something from Apple. Obviously the scientists and engineers in the labs in Cupertino must be much more on the ball than those dullards over at Sony, Philips, Dolby and DTS, or maybe it’s just the marketing (consumer confusion) department.

Consumers are confused enough by the audio /video industry. Remember VHS/Beta? Not to be outdone, this generation of a/v marketers has delivered HD-DVD / Blu-Ray Disc. Few remember it, but we nearly traveled don the same path with standard DVD, until an 11^th hour compromise by Sony and Toshiba (Hey! Those are the same two companies involved in the whole HD-DVD / BRD thing) put the whole thing to bed, and let us all enjoy DVD.

Regarding Apple leading consumers down the “High Resolution” path to low resolution audio, it’s been seen before.  Remember FOX’s “Fox High Resolution” video broadcasts a few years ago? When the other networks were broadcasting in HDTV, Fox decided they would put off the investment in transitioning to real HDTV a few years by giving consumers “High Resolution” TV (HRTV??).That stuff was widescreen TV that ran at higher than regular TV, but lower than HDTV resolution, hence the “high resolution” moniker. Consumers were so confused that few probably even knew what they were getting, and that’s probably just as the FOX execs wanted it. Maybe the same guys are in the marketing departments at FOX and Apple.

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Posted by debtblog at 02:38 PM | Permalink | Comments (0) | TrackBacks (0)

For many people buying a car is like going to the dentist; you’ll get rid of some long term pain by undergoing a few of the most grueling hours imaginable. It’s not made any easier by some of the crap the dealers pull in an attempt to scrape a few, or more bucks from every sale. Some of the techniques they use are not so bad, but others are downright unscrupulous. Not all car dealerships operate this way, many are great businesses that operate under the principle of “treat the customer right and they’re yours for life”. Others  however, more than deserve the bad reputation the industry as a whole has earned for itself.

Here is a dealer scam you should look out for if you venture into a car dealership this summer. As with any major transaction, you should bring your best stuff and keep your guard up. Make sure you read every little thing before you sign it. It won’t be easy, with the 40 page contract you may be handed, but think about it for just a second, please. If there are uh, questionable, clauses in the contract where would you expect to find them? Well, buried deep within it, of course, and probably in small type.

One way you can avoid the following scam, and many other questionable car dealer practices, is to secure your own car financing before you venture anywhere near the dealer’s lot. They make a substantial percentage of their profit on what’s known as the back end of the deal. That includes everything that you buy besides the actual car itself. One of the main profit centers of most car deals is the financing package. That’s because the dealer often sells the financing contract for a nice bit of extra money over and above what they made on the vehicle. They can make as much, or in many cases more, than they do on the car sale itself. There are some dealerships that almost use the car deal as just a vehicle to sell financing products. It’s amazing.

I know; I worked at a Nissan dealership for a summer during college. Looking back on it now, it was a great education. I know now they were not one of the dealers you’d want to send your friends to. That’s probably one of the reasons they went out of business years ago. Sorry, I digress.

The scam that makes me hot is known as the “spot delivery scam”. You may have had it happen to you or someone you know before. It’s pretty simple, really. You go to the local car dealership and find that fantastic bit of plastic, aluminum, and steel that’s been keeping you up nights for the past year. It drives even better than you imagined. Oh my god! The power just shoves you back in the seat when you barely tap the accelerator. It corners like it’s on the proverbial rails, too. The leather on those seats is so butter soft, and smells out of this world (sorry, PETA!).

The salesman seems like a pretty nice guy too. After a bit of haggling (you weren’t born yesterday, after all) you work out a great deal on your new plastic fantastic and go zooming off the lot, sun streaming through your new sunroof. You really worked them over, didn’t you? Boy, that motor sounds great! After a week, your enthusiasm for your new love hasn’t diminished in the slightest. In fact you are more enthralled with your new car than you were when you first took it home. By now you’ve showed it off and bragged about it to all your friends, your associates at work, parents, and the guys on your softball team.

That’s when the phone call comes. “Mr. Jones, hi, it’s Mike down at XYZ Motors. How are you liking your new ride?” Yeah, we sell a ton of those, we can’t even keep them in stock. They’re one of the best cars in the past 5 years. I knew you’d love it. Hey, we got a call from XYZ financial today. It seems there was a little problem with your financing. It’s no big deal, really.” ”I’ll take care of it for you. I just need you to come in and sign a few papers. It’ll only take a second, and I’ll get you back out on the road. You want another excuse to drive your cruiser anyway, don’t you? Would you rather come down this afternoon or in the morning?”

You have just been victimized by the spot delivery scam. They let you take the car but hadn’t actually approved the financing. You signed a contract with a “upon approval of financing” clause. So, you signed a contract, drove off the lot in your new car and actually didn’t own it yet. After you take mental ownership of the vehicle, they call you back and lower the boom.  If you’re lucky, you can just take the car back, but don’t count on it. For one thing, due to human nature, few people would ever do that anyway. In their mind, it’s now their car. They want to keep it that way, and if they only have to pay an extra $20 - $50 a month, they’ll do it.

The scam is worse because the dealer knew exactly what financing you were qualified. They knew more about your credit than anyone but the feds and your bank. They can get you into a higher interest loan with this scam, however. They basically bait you into the car with a low interest loan, let you mentally embrace it, take mental ownership of it, and then hit you with demands to revise the financing terms you agreed to. Most people just go along with it. That’s one of the reasons to secure your financing before you ever go near a car lot, and to get your credit rating up as far as possible before you make a major transaction.

That’s only one of the little tricks and psychological games you’ll encounter when you’re buying a car. There is a litany of others, ranging from extremely subtle to the completely insane. The best way to counter these is to be as informed as possible and to have your financing before you go to shop for a car. The car dealer should obviously be able to make a profit. They have high overhead and provide jobs and a service for the community. But they should not be underhanded and try to screw the consumer, which some do, and do it with gusto. A fantastic resource to discover what you’ll face at the dealership, and show you how to potentially save large sums of money is Peter Humleker’s book Car Buying Scams. As a former dealership general manager, he’s seen it all and can give you a rare insider’s perspective on what you’ll encounter and what to do about it.

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Posted by debtblog at 02:55 PM | Permalink | Comments (0) | TrackBacks (0)

What can you do to ensure your home sells fast? Aside from reasonable pricing, it’s all about the presentation. Just like in retail sales or in a restaurant, attractive presentation will make all the difference. Just as your dinner at Spago looks a whole lot better than the chow you picked up in the army chow line, how your home looks to prospective buyers will make a major difference in the time your home is on the market. Due to this phenomenon, companies that specialize in home staging have thrived in the past few years. Many of the things they do you can accomplish yourself, if you’ve got a $1,000 and a few weekends of spare time.

One of the keys is the overall condition of your home. If your home has holes in the walls and is in pretty miserable state of disrepair, you may have your work cut your for you. On the other hand, if your home is in basically good shape, you’re ready to go. Just like in the restaurant analogy, how your home looks the first time the prospective buyer lays eyes on it goes a long way to making sure it will move into the “sold” column relatively quickly. There are a few things that affect this right off the bat. Realtors call this “curb appeal”. Be prepared to put in few weekends of really hard work; the kind that will make you feel like you’ve been through a Marine Corps boot camp.

Home sales success rule #1 – Make sure the prospect sees a nice front yard – The first thing a buyer sees when they pull up should be a neat, tidy yard. Get rid of all debris, mow the yard for Christ’s sake, and do a bang up job of weeding and edging. A few yards of new beauty bark goes a long way here. If your porch is looking rather long in the tooth, spend a day repairing, repainting and refinishing it. I guarantee the first buyer that puts their foot through a rotten board in your front porch will not offer your top dollar any time soon.

The front door is vital in the overall appearance of your home. You want it to be inviting. Repaint it and maybe even put in shiny, new door hardware. In some cases you can even make a case for replacing it with a new one. If you’re handy, you can replace it in a couple of hours. Pre-hung doors are available at the local mega home improvement warehouse for a few hundred dollars, maybe less during a sale.

If the sidewalk leading up to that front door is missing chunks and cracked, you may be able to replace it for minimal dollars too. Concrete is pretty inexpensive, and if you can build a form out of 2x4s and round up some rebar, you can make a beautiful new sidewalk. Paving stones are another option here. They are pretty reasonable if you look around. . (See yesterday’s post about how to get building materials for free for some insight) It will probably cost you more to haul the old sidewalk away than to put in your new one. Remember, the operative word is “inviting”. You want people to come into your house with a warm feeling that says “I’m home.” If you’re lucky, they soon will be.

Home sales success rule #2 – Clean everything like you’ve never cleaned before. - All the tricks and hard work on the curb appeal won’t mean squat if a shambles greets the unsuspecting buyer when they walk through the front door. Clean the inside of your house from top to bottom. As important as cleaning dirt from the surfaces is a complete de-cluttering of every room. There should be nothing to detract from the appearance of any of the rooms.

In addition, stacks of crap, even neat stacks, raise the hackles of buyers and make the room seem smaller. When you’re trying to sell your house, small rooms don’t help. To assess the success of your cleaning efforts, have an outside observer, such as a neighbor, friend or relative come over and take a look see. Often they’ll spot problems you might miss due to your familiarity with the house.

If you have rooms with too much furniture, or an eclectic collection of furniture that matches neither itself nor your home, haul it away, have a yard sale, or store it before the first potential buyer opens the door. Some homeowners simply have too much furniture and could stand, for the purposes of selling their house faster, to get rid of some of it. As with clutter, less furniture can also make a room seem larger.

Home sales success rule #3 – Paint all rooms – unless you recently painted, paint every room, including trim. Paint can be your best friend in a home sales situation. It can make all manner of sins disappear. Make sure you clean the walls thoroughly first, lest any dirt or grease show through the paint when you’re finished. In addition to the fresh, new, look, paint will give your house a fresh, new smell. That freshness makes buyers subconsciously feel welcome and at home.

One note regarding painting: nothing too outrageous. You want to appeal to the maximum number of potential buyers. Great colors are lighter shades such as off-white, light tan, light taupe. You can try to create nice touches such as painting one wall a different color as an accent wall, but make sure you consult someone who knows color first.

Home sales success rule #4 – Depersonalize it. – That trophy your kid won for their karate tournament a few years ago may still make you proud, but displaying it won’t help you sell your home. You want to make the buyer feel as if it’s their home, not yours. Pack away most of your family photos, and definitely don’t have them lining the halls. Another bonus you’ll receive when you remove the photos and posters from the walls is that you’ll see where the walls have faded and how badly you really need that repaint after all.

You may want to consider hiring a home staging firm. They can sometimes make a huge difference. These companies are well versed in such subtleties as furniture arranging and paint colors. The better home stagers are experts in buyer psychology. If your home is more than a few hundred thousand dollars, the money you pay a home staging company is a comparative drop in the bucket. Just watch one of those shows on TV where the buyers laugh behind the seller’s backs for a reason to hire a home staging company. They may not be right for everyone, but home staging has dramatically increased in popularity for a reason. As you would when shopping for anything else, be thorough. Look around, and get recommendations.

The bottom line is that for a month's worth of weekends and few thousand dollars, if your house needs a bit of work, or a weekend and couple of nights after work if it doesn't, can make all the difference when you are trying to sell your house. Good luck! 

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Why? The homeowner has already paid the contractor for them, the job is done, and most of these contractors don’t have the facilities to store the leftovers. The left over materials aren’t enough to do one of the large custom jobs these contractors specialize in, and the materials need to match. Materials such as stone pavers and tile for floors, baths and kitchens won’t match and high end custom home clients want their materials to match. Hence they are worth nothing to the contractor.

I had a flooring contractor tell me they had 17 pallet loads of left over materials the last time they moved their shop. It cost a fortune to move it, so he wasn’t about to get stuck in that position again. That allowed me to get a nice selection of travertine marble tile to redo our bathroom. How much did it cost? Nada. This type of thing is repeated hundreds of times a day throughout the country. I saw another person haul away a very large lot of beautiful marble tile for nothing. He’d also been able to re-side his house with cast off siding scavenged from high-end custom home projects. Again, he paid nothing for the privilege. I’ve gotten brand new stainless sinks as well.

Other bounty can be had for very little money from remodeling projects. Kitchen appliances may not fit in to the new kitchen plan and be cast off. I’ve seen people receive Wolf gas ranges from such arrangements. It’s often cheaper for the contractor to give things away than to arrange for them to be hauled away. Another acquaintance was able to get nearly new Whirlpool washer and dryer sets from an apartment – condo conversion project. That netted him a handsome Craigslist  profit after he took a set for himself.

The caveat for these great deals is that you usually need to know someone involved with the project to make these deals happen. If you are involved, keep your eyes open. It pays to be there at the right time. Often these deals are available only at the exact time the stuff is either torn out or that portion of the project is finished. This can allow you to get some nice materials, increase the equity in your home, and pay nothing but a bit of sweat.
 

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Why should you care, other than the fact it indicates development of sorely needed manufacturing capacity in the U.S.? What if you live in New Hampshire or Oregon and are thousands of miles away? It would be a pretty long commute, even in the nicest ride. You should take note because such developments point to the need for quality information, and how such information can make you money.

There are countless examples of depressed communities being saved by economic development. In every case, a little knowledge by investors created a massive profit opportunity. The old axiom “Knowledge is power” is true, but “Knowledge is profit” is just as accurate. It’s all based upon good, timely information. In the case of the ThyssenKrupp plant it’s probably not too late for astute real estate investors to purchase properties and make a handsome profit, even though some profit opportunity has already been lost due to the speculation created by publicity surrounding the deal.

There are many places to gain such information in an attempt to ferret out potentially profitable real estate investment opportunities. One of the best is local county websites. They will almost always have listing of funds that have been appropriated for future projects. It’s one of the advantages of the environmentally conscious society in which we live. Yes, it makes projects 50% more expensive, but it also gives investors a lengthy warning of future projects. Years before any major road expansions or other construction projects are undertaken, an EIS, or environmental impact statement must be prepared. This requires study, and in the case of projects using any public money, financial appropriations for such studies.

This is important, because years before a road is put through or expanded or other value altering construction projects are undertaken, the funds will be appropriated. In many cases, these projects are fairly quiet at this stage and few in the public will have any inkling this will be occurring. This gives you, as an investor, an opportunity due to knowledge of impending projects. These often build value in a property and profit for the investor.

Another successful technique that works in growing communities, especially those with fairly flat topologies, is to purchase properties in a direct line with a major thoroughfare, but a mile or miles away from it. This is long term investment strategy, but an effective one. In time, the community will grow and the road will be extended, or if it exists now, it will be expanded. When that occurs, the property you purchased will experience strong appreciation. You should be prepared to wait some years before this occurs. However, I’ve personally seen properties that were purchased for far less than $50,000 be sold for over $5 million in 20 – 30 years using this strategy. Sadly they weren’t mine, but I haven’t been investing for that long yet. Not a short term investment, but a great retirement.

As with anything, there is risk associated with this strategy. You could be wrong, the area could suffer economic collapse, there could be a zoning change, or other legal action and you could be sitting on some land that makes a great tumbleweed farm or gopher park. There is risk with every investment though. That’s why the quality of your information and the thoroughness of your research is so vitally important. Some time spent now can pay huge dividends later. That information, combined with other factors the land possesses, is a formula for large real estate investment profits. The same is true for other investments. Good quality, actionable information is the one thing that can separate losers from great investments.

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What are some of these common credit mistakes that can conspire to sabotage your pristine credit score? Glad you asked; here they are, actually in no particular order:

(These are not to be confused with things you can do to actively ruin your credit score on your own, like pay bills late, or default on your mortgage.)

Credit Report Mistake #1 – Using different names when applying for credit.
An example of this would be if you applied for credit under both Mike and Michael. This can cause some of your credit to be missed and not be counted. If you are paying bills late or otherwise neglecting your obligations, this may not be such a bad thing, but for those of you with great credit, you want a large, well documented credit history with lots of “pays as agreed” notations on it. Be consistent.

Credit Report Mistake #2 – Credit report has information about the wrong person.
As crazy as it sounds, your credit report may actually contain someone else’s information. This may get easily missed, especially of you’ve got a fairly thick report. All this information is entered by a human somewhere and it’s definitely not unheard of for either social security numbers to be inaccurate or some letters of a name to be incorrect. You could be Bob S. Miller, and have report information about a loan to Bob D. Miller or Rob Miller on your report. If your handwriting is uh, not what it should be, or you’re practicing to be a physician, it’s not much of a stretch to see how someone could misread your information.
 
Credit Report Mistake #3 – Payments are applied to the wrong account.
Another mistake is made when loan or credit card payments find their way into the wrong account. This can easily happen when you have multiple accounts with the same lender. Your payment for the account that ends in 4994 is mistakenly applied to the account that ends in 4995 or 9449. If you normally pay extra on your accounts, you may not notice the mistake because you never get behind enough in your payments to trigger a notice from your bank.

These kinds of credit report mistakes can go undetected, yet can slow down loan applications and cause you to pay a higher interest rate on credit than you’re eligible for.

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Should you grab the cell phone, pull over for safety, and call that number right now, just like the ad says, even if you don’t really need a new mortgage? Probably not, but you should see what those catchy phrases really mean, so you can decipher what’s going on when you are going for your next mortgage.

The one that really gets me is the “No payments for a year” or it’s cousin, the “Vacation Mortgage”. What they fail to mention is that you may be out of the payment business for a year, but your mortgage interest isn’t on the same vacation plan. That’s right; it’ll accrue interest, just as it always does. The difference is that you get to pay interest for 31 years now, instead of 30 years. Typically, those 12 payments you missed are just added to your loan balance as well, where you can pay interest on them, too.

If you’re really lucky, you can get one of these bad deals at the same interest rate as a 30 year fixed rate mortgage, but don’t count on it. These types of loans are usually a few tenths higher. Talk about kicking you when you’re down. You’ll pay more initially and for the long term. You’ll get the thrill of paying for that mortgage “vacation” for much longer than that ill advised cruise you put on your Visa card a couple of years ago. So if you do that, and then invest the cash, as they suggest in the ad, you’d better get a hefty return or you’ll be going backwards, not the financial direction your supposed to be traveling.

What about the claim you’ll hear bandied about of “Mortgage rates have never been lower” Is it true? Well, that’s an easy one to check. There are literally hundreds of lenders where you can check what they are offering for various types of mortgages on any given day. A great resource is bankrate.com. You can go to the various financial websites, such as MSN Money or Yahoo Finance and see what the various financial indices are, and their histories. You’ll be able to tell if mortgage rates are, in fact, at their lowest rates in years, like the ads claim. If they’re not, you know those behind the ad really only care about your money vis-à-vis it becoming their money, not for your financial well being.

What about the old “We have no commission loan officers” There are so many ways around this one. Although you may be dealing with a reputable company that pays its mortgage officers on salary, that alone doesn’t guarantee impartiality on the part of the loan officer. There are many ways to offer incentive pay that aren’t necessarily called commission. Have you ever heard of a bonus? How about a company car if you keep your closed loans above a certain amount? In point of fact, a loan officer paid on commission is often more likely to bring you a loan you like. After all, they won’t get paid until your loan closes, so they are quite likely to make sure it does. If they’re on salary, they get the check every two weeks, no matter what.

What you really want to find is a reputable mortgage company that cares about its customers and gets a steady stream of referral business. When all is said and done, if they have consistently made your neighbors and others in your community happy, chances are they’ll do the same for you as well. Oh, and you should run when they start talking about a “4% Fixed Payment Loan”. That isn’t the same as a 4% fixed rate loan. You can’t really believe you’re getting a 4%, 15 or 30-year fixed rate mortgage, can you? They can keep the payment the same and vary the interest rate, every month in some cases. You want to be sure you’re comparing apples to apples, or 15 year fixed rate mortgages to other 15 year fixed rate mortgages, for example.

Now, turn on your radio again, and forget those stupid ads.

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The following was sent to me in an email last week. I have no idea where it originally came from.

Makes a person want to cry.

  A Japanese company ( Toyota ) and an American company (General Motors)
decided to have a canoe race on the Missouri River . Both teams practiced
long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the
reason for the crushing defeat. A management team made up of senior
management was formed to investigate and recommend appropriate action.
Their conclusion was the Japanese had 8 people rowing and 1 person
steering, while the American team had 8 people steering and 1 person
rowing.

Feeling a deeper study was in order, American management hired a
consulting company and paid them a large amount of money for a second
opinion. They advised, of course, that too many people were steering the
boat, while not enough people were rowing.

  Not sure of how to utilize that information, but wanting to prevent
another loss to the Japanese, the rowing team's management structure was
totally reorganized to 4 steering supervisors, 3 area steering
superintendents and 1 assistant superintendent steering manager.  They
also implemented a new performance system that would give the 1 person
rowing the boat greater incentive to work harder. It was called the
'Rowing Team Quality First Program,' with meetings, dinners and free pens
for the rower. There was discussion of getting new paddles, canoes and
other equipment, extra vacation days for practices and bonuses.

The next year the Japanese won by two miles.

Humiliated, the American management laid off the rower for poor
performance, halted development of a new canoe, sold the paddles, and
canceled all capital investments for new equipment. The money saved was
distributed to the Senior Executives as bonuses and the next year's
racing team was out-sourced to India ..

Sadly, the End.

Sad, but oh so true! Here's something else to think about: Ford has spent
the last thirty years moving all its factories out of the US, claiming
they can't make money paying American wages. Toyota has spent the last
thirty years building more than a dozen plants inside the US

The last quarter's results:

Toyota makes 4 billion in profits while Ford racked up 9 billion in
losses. Ford folks are still scratching their heads.

IF THIS WASN'T SO SAD IT MIGHT BE FUNNY!

Note: For much of that 30 years time, a majority of the blue oval's products left something to be desired. This is possibly due to the cancellation of the canoe deveopment programs (and the billions in health care costs). 

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If you are disciplined and a skilled investor, or use a financial advisor who is, taking all the money in a lump sum may indeed be the proper choice. However that doesn’t describe the majority of those with defined benefit pension plans. Many are fairly unsophisticated investors who’ve never had to manage a large sum of money before. That being the case, a majority of them is ill-equipped to manage it correctly. You should know this too; if they are not one of those who bill on an hourly basis, your financial advisor will make a tidy bit of cash if you receive the lump sum payment option. That’s because they will rake in substantial commissions from the investments you purchase with the retirement plan funds you receive.

How can you determine which is the proper way to go? Well, there are probably as many answers to that question as there are retirees and financial consultants, of which I’m neither. However there are some simple questions you can ask yourself to assist you in determining the proper course of action. Plan this move well in advance, and give yourself plenty of time to make the proper retirement choice. If you mess this one up, it could make the difference between your next decision being weather to eat at McDonalds or Wendy’s, or work there.

Your pension plan is an annuity. It will pay you a steady income stream until your death. In many cases your spouse may receive payments until their death as well. The value of the annuity is determined form your pay and how long you were with the company. The lump sum is based on the national life expectancy figure, combined with the previous two figures. Your expected remaining life weighs heavily on your decision. If you’re as healthy as the proverbial horse, you may do better if you take the lifetime payments. Why? Because the lump sum, being calculated from a national average, is likely to be smaller that what you’ll receive if you live a long, fruitful life after retirement.

Look at your life as an actuary would. How’s your health? What about your family health history? If both are good, you may outlive the national estimate by a substantial margin, assuming you don’t get hit by a train next week. Be honest, if you’re substantially overweight, in poor cardio vascular health, or have been told to shape up by your physician, you should do so, or check the “lump sum” box.

As a way of comparison, the U.S. DCD gives the average life expectancy of a 65 year old American male in 2004 as just under 83 years. A woman can expect to last a bit longer, to 85 years. If your family is full of centarians, you will probably come out ahead by getting a steady stream of payments from your pension plan, as opposed to that one, big check.

You may be tempted to view the whole thing with the “bird in the hand” mentality, and take the lump sum. That may be the proper thing to do if your company is on shaky ground financially, especially with regard to its pension finances. You are, however federally insured up to $49,500 per year if you’ve retired at age 65 or later. That’s something to think about. That dollar figure applies to pension plans insured by the Pension Benefit Guarantee Corporation (PBGC) The PBGC will most likely apply if you worked for a private firm (except most law firms or physician’s organizations) of greater than 26 employees, that had a defined benefit retirement plan. You should make a quick call to your HR or pension department to be sure.

You may also do better if you company offers a bonus for early retirement. Some firms have concluded that it’s better to show employees the door a bit early, than continue to provide them with a weekly paycheck, insurance and other benefits. Keep in mind that every retirement plan is somewhat different. You should know the details of your specific plan before you decide.

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Recognizing you are going to pay more for a loan if you have bad credit, how do you know when you are being scammed? Is it a scam, or are you just getting the normal fee and interest rate increase you can expect because of your bad credit? Here are some common tricks tried on loan applicants with bad credit. Do any of them look familiar to you? In no particular order:

Bad Credit Loan Scam #1 - The Advance Fee Loan

If you need a loan, why would you pay for it up front? Seems like a bad deal to me, but they know you may have few options for new credit. This scam works when you are guaranteed a loan if only you pay an upfront “processing” fee. The fee ranges from a hundred to several hundred dollars. The really bad deal is that, in most cases, the crook just disappears with your advance loan fee.

This scam is tried not just on individuals, but on small businesses. The scam artists know that many business owners will go to great lengths to try and save their businesses. They prey on this. The bottom line is never send any money to a loan organization as a pre-condition to getting your loan.

Bad Credit Loan Scam #2 – Information Mining Scam

In this scam, you identity and bank information is stolen right out from under you. It works like this: Your credit is bad and you are approached for a loan by a legitimate sounding company. In some cases, the crooks will even appropriate a legitimate financial institutions logos and other official looking paperwork. You are faxed a “loan application package”.

As is typical for loan application packages, it contains a request for all you private info, such as bank account numbers, addresses, balances and your SSN, birthdate, and address. If you send this back, you are screwed. Now someone in the Ukraine or Bulgaria has your most secret information. They aren’t after your credit, it’s bad enough to be of little or no use, but they do have your bank account information, and soon there’ll be no money in your account, either.

Bad Credit Loan Scam #3 – Contractor / Home Improvement Loan Scam

You’re credit’s hovering in the low 600’s and you weren’t really thinking about remodeling the kitchen and adding on a few hundred square feet to your humble abode, but the guy at the door was so persuasive. “You’ll increase the value of your house”, he claimed. The roof needed some work and the floors were terribly worn and creaky, so you put aside that nagging little voice and signed a contract to get he work done. The guy was really nice, and he even said he’d help get you finan