Ah, a vacation sounds lovely right now. Instead I’m at home working and trying to get all my mortgage papers in order. Sigh.

Instead, we’ll dream about the Carnival of Personal Finance #213 hosted by Man vs. Debt from New Zealand!  He included my post about paying more than a home’s appraised value. I also recommed M is for Money’s tips about the home inspection.

M is Money also hosted the Festival of Frugality #186. In addition to my post about the new home appraisal process, I also recommend Bargaineering’s tip about square foot gardening. I have a big space for my new garden, but I may borrow some of the tips in the comments to make it more effective.

Money Beagle hosts Money Hacks Carnival #73. In addition to my post about being productive while working from home, I also recommend this list of Twitter job feeds, to make your search for a job more productive.

Once we entered escrow, I was hopeful that we’d be able to close the third week of the month so I’d have a weekend to paint and then be able to move out at the end of the month. That’s not working out as planned, but fortunately, I won’t have to pay rent and a mortgage at the same time, because I’ve learned the ins and outs of giving 30 days notice to move.

When You Can Give Notice to Move
Fixed-Period Lease
If you’re on a fixed-period lease, then you’re responsible for the rent until the lease expires. Moving at the end of the lease is as simple as notifying your landlord 30 days before the lease expires that you’ll be leaving.

Month-to-Month Lease
It’s certainly easiest to move out at the end of the month on a month-to-month lease. Then you don’t have to worry about prorating any days in the next month. However, that’s not always possible. If you need to move partway through a month, check your local rent laws to determine your rights. I learned that California law allows renters on month-to-month leases to move anytime during the month. You’re only responsible for the days you occupy the home, or 30 days from the date you give notice, whichever is longer. For example, if you give notice on the 10th, you’re responsible for the rent until the 10th of the following month, even if you move out the 5th.

How to Give Written Notice
Giving written notice is easy. It should be typed and read something like this:

June 15, 2009

To:
Joe Landlord
1111 May Lane
Los Angeles, CA 90066

I, Aryn Money, hereby give notice that I intent to terminate my tenancy of 1111 June Road #3, Los Angeles, CA 90067 as of July 15, 2009.

My forwarding address is:
1111 July Road #6, Los Angeles, CA 90068.
My phone number is: (310) 555-1234

Sincerely,

Aryn Money

Sign in the space. I would provide a cell phone number if you don’t yet know what your new phone number will be. If you have a roommate who will also be moving, they must sign the notice, too. If they’re not moving with you, have them provide a separate notice with their own forwarding address.

If you want to give a reason why you’re moving, you can, but it’s not required. You must give a forwarding address if you want your security deposit returned to you in a timely manner.

How to Deliver the Notice
If you have a property manager, simply hand it to him or her. If you have an off-site landlord, mail it to the address on your lease or the place you mail your rent. If your landlord picks up the rent, leave it in your payment envelope.

Pro-rating the Rent
If you’re moving mid-month and your state permits pro-rating rent, then call your landlord to ask how much you should pay for the partial month. It should be your monthly rent divided by the number of days in the month, multiplied by the number of days you intend to remain. If you pay $900 a month and move on the 10th, you should pay $300. If you paid first, last, and a security deposit, you shouldn’t have to pay anything and should receive a refund for the unused days.

Once you give notice, keep your landlord appraised of any changes. If you need to stay a little longer, you’ll need to pay a little more. If you need to leave earlier, you’re still responsible for the full 30 days.

I saw an interesting story on CNNMoney about the recent trend toward taxing the rich to pay for government programs, both major and minor. I was already a bit stabby about the “tax them if they make more than $250,000″ mantra, and now I’m even stabbier. If you want to see me “defend the rich,” keep reading. If not, then feel free to yell at me in the comments starting now.

Is $250,000 Rich?
My answer there is: it depends. If you’re living in rural Nebraska, then yes, a $250,000 a year income might be considered rich. However, you might also be a farmer and that income is revenue from your farm before expenses. So, then maybe you’re not rich.

Or, let’s take the more likely scenario – a two-career family in California. It’s entirely possible for a couple living in California to earn more than $250,000 a year. It’s also very likely that those salaries are the result of very expensive MBAs, law degrees, medical degrees, and other advanced degrees. So a good chunk of that money is going toward student loan debt. Another big chunk is going toward the highest cost of living.

$250,000 seems like a king’s ransom to some people. It seems like the income of middle-class, middle-aged families to other people. In effect, a tax on people making more than $250,000 a year is a tax on the middle class for those of us who don’t live in the middle part of the country.

But They Don’t Need the Money
That’s the argument you hear from others intent on taxing them. No, most people making more than $250,000 aren’t hurting financially. They can afford what they need and have some money to play around with. I will give you that.

Could This Actually Hurt the Economy?
I’m no economist or expert, but it seems to me that we’ll reach a breaking point if the government adds a 1% tax here, and a 2% tax there, and another 1% tax there. Slowly, the tax rate creeps up. The top tax rate currently stands at 33%. If enough federal and state programs get pushed through, that number will creep up. Then factor in the tax increases that will be necessary to pay off all these deficits we’ve run up and we’re zooming past 40%. Suddenly those “rich” people aren’t feeling particularly rich, or particularly like buying that expensive car, or that new big screen TV, or any of the other purchases that make up most of this country’s economy. Those same people will also start looking for ways to hide their money so they don’t have to pay for all those programs.

Funny Thing: Many People Don’t Support These Taxes
I saw an opinion piece that argued that people are aspirational about their income. They don’t necessarily want to supertax the rich because they expect to be rich someday themselves. I saw that very thing happen in California when a very rich actor wanted to pass a 1% tax on incomes over $1 million to pay for a mandatory pre-school program. The proposition went down in flames. Maybe it was the idea of mandatory pre-school, but I suspect it was the idea of yet another tax. We Californians are taxed enough, thank you very much.

What If They Don’t Index that Income to Inflation?
That’s my biggest fear with these taxes on the rich. If we’ve learned anything about attempts to capture more of the income of the rich it’s this: inflation gets us all. The AMT was created to tax the rich. Except it wasn’t indexed to inflation. Now it taxes the middle class. If any of these “tax the rich” proposals get passed, they must be indexed to inflation, otherwise they really will be middle class taxes thirty years from now.

Look, I know many of these programs are important. I also know we need to pay for them without creating debt, but I don’t see tacking on more taxes little by little as a way to do it. The best option would be to reduce spending in other areas. I haven’t considered the flat tax or the fair tax, but maybe they ought to get a closer look. Or maybe we need to pass new tax rates at all levels. Whatever we do, it needs to be honest and up-front, not sneaky taxes that sound good on paper but don’t work in reality.

Okay, I’ve said my piece. Attack away.

In addition to buying a new home, we’re also planning to make several other major purchases, including a washer/dryer set, a fridge, a dining room set, china, a new family room set, a living room set, a new sofa bed for the guest room, a new TV, and a new TV stand. Plus the usual stuff like lamps, towel racks, etc. that make a home feel lived in.

That’s a lot to spend, especially after shelling out a six-figure down payment. We’re also looking at other big expenses like property tax and repairs that will total around $6000. Some of the repair money may come from the bank as a closing credit, but some will have to come from us.

How to Prepare for Major Purchases
Obviously, we won’t be buying all those things right away. We’ll buy the washer/dryer before moving, but everything else will wait so we can buy them during the next six months to eighteen months. Here’s how I budgeted for the items so we can buy what we need without going into debt.

Shop Online for Prices
The first step I took was to shop online for items that met my quality and price standards. I don’t want to buy something so cheap that it won’t last more than a year, but I don’t need an heirloom dining room set, either. I want an energy-efficient washer/dryer set, but I don’t need top-of-the-line bells and whistles. So, I compared prices at various stores to set a budget for each item.

Determine a Time Frame
Some items we need immediately, like the washer/dryer. I’m not dealing with a Laundromat! I first thought we’d need the fridge right away, too, but we’ve decided to move our fridge with us so we can get some cabinetry modified to fit the fridge we like. Once again, I don’t need a top of the line fridge, but I do want something that will meet our needs for the next decade.

Other time frames were trickier. I learned in April that I’m hosting Thanksgiving dinner for nine, so I’ll need to buy the dining room set, or find a set of sawhorses and plywood and some borrowed chairs, by November. If I want to serve a fancy dinner, I’ll need to buy the china, too. We didn’t receive any for our wedding, which I’m okay with because I don’t like the original pattern anymore. I also found an online place to buy it at a big discount, but it’s still a big expense.

Once we went into escrow, I also listed out other projects specific to our house (landscaping, for example), an amount, and a target price.

For example:
Dining Room set – $1500 – 11/09
Washer/Dryer – $1200 – 08/09
Sofa Bed – $1000 – 09/09
China – $1500 – 11/09
Backyard steps- $2000 – 08/10
Service panel – $2500 – 11/10
Property tax – $3500 – 12/09
Property tax – $3500 – 04/10

The list is much longer, but you get the idea.

Determine Your Savings Rate
In order to avoid going into debt to buy these items, I then calculate the time until I’d like to complete the project. I divide the target price by the number of months to get the amount I need to save up. For example, our electrical service panel should be replaced. If we do it in 15 months, we need to save $166 a month until then.

Reprioritize if Necessary
I also have to make sure I maintain my other goals like rebuilding our emergency fund, buying a new car, and saving for retirement. If saving up for any of these house purchases or projects puts the other financial goals at risk, I’ll either have to buy something cheaper or extend out the target period. Some things can’t be pushed out – like property tax – so I have to make those top priorities.

Start Saving
Now, each month, I’ll set aside money for each project. We already budget for irregular expenses, so these will go in that category. If I can’t meet all of them, choose one to push back. The goal here is to avoid debt. My only exception is the 12-months no interest deal offered by some appliance retailers. Even though we have the cash, I’m considering using one of those offers if we can’t find our desired appliances as scratch and dents. In some cases, taking advantage of the deal also gets you free shipping and an additional discount. Since we know we can pay it off within the timeframe without interest, it might be worth it if it saves more money.

I already know that more things will come up as we get settled in our new house, but we’re also aware that we don’t have to do everything at once. Sure, there are a few upgrades we’d like to do, and some repairs/changes that need to be made quickly, but this is a long-term home, not a flip. We’ll take our time, pay cash, and do it right.

As we inch closer to closing on our house, I’m working down our checklist of minor decisions to make. If you’re planning to move into a house here are a few things to consider in advance. If you’re recently moved, please share your wisdom!

DirecTV or Cable?
The house we bought has DirecTV dishes already installed, so now we’re trying to decide between DirecTV or simply transferring our current cable over. The first year, DirecTV is cheaper. The second year, cable is cheaper depending on the number of Premium channels we opt for. However, our cable box broke this weekend, which isn’t earning points for the cable company. We still haven’t made the final decision on this.

Home Phone or Cell Phone?
We’re also still debating whether or not to keep a home phone in our new place. On the one hand, we rarely use our home phone. On the other hand, you can’t trust VOIP in a major earthquakes, and cell phones are questionable. We would also need a home phone line if we wanted to use the installed alarm system. Once again, no decision yet.

Standard Fridge or Fridge with Ice Maker or Water Dispenser?
We’re moving our current fridge in because we need to get some carpentry work done before installing a new fridge. We’d also have to get a water line run through the floor if we want to buy a fridge with a built in ice-maker. We have a filtered tap on the sink, so no need for a water dispenser on the front. So, we’re debating whether we should buy an ice making freezer or not.

Professional Movers or Friends?
Since we’re moving into a house and are over the age of 30, we’re hiring professional movers. We’re just not up to all that lifting and hassle anymore. The movers will also be much faster than us and our gang of friends. However, we’ve both moved in the past with the help of friends. As long as they’re good friends and you’re up to the job, start rallying friends well ahead of the big day.

Professional Painters or Friends?
In this case, we’re asking friends and relatives to help paint. We’re not doing all of the rooms before moving in, just a few, so it’s a job that can be tackled in a weekend. In this case, the cost savings is also substantial. Professional painters would cost over a thousand dollars for just those four rooms. We can buy paint for less than $500 and borrow most of the supplies.

These are just some of the many decisions we have to make in the next two weeks. If you’re planning to move, keep a notebook handy and add to your list of decisions each time something pops into your head. You should also keep a list of things to buy and a checklist of things to do. Add to it as you go to make sure nothing’s forgotten. With some things, it won’t matter if you forget them, but with others it could cost you a lot of money if you miss a deadline.

If you’ve moved recently, are there any seemingly minor decisions that became major? I’m sure there’s something we’re forgetting.

Once again it’s been a month since my last stabby post, but I’ve found something that REALLY gets my goat. Get ready for it: more AIG bonuses. As you’ve probably heard, AIG is asking for permission to award yet more bonuses to the division that is at the center of the global financial collapse. I’m beginning to wonder how AIG defines “performance.”

Bonuses in the Real World
In the real world occupied by those of us outside the financial system, a bonus for performance is generally assumed to mean good performance. In this economy, even employees who are providing excellent service to their employers are not getting bonuses.

In fact, some executives and employees are taking pay cuts to keep their company afloat, regardless of performance. They certainly aren’t getting bonuses after losing the company money.

Bonuses in the AIG World
I could sort of understand bonuses paid to high-performing employees in other sectors of AIG’s business. Their regular insurance business is still healthy. The only sector of their vast business that went bad is the financial products division that sold insurance policies on derivatives based on imaginary numbers. So fine, if they want to pay bonuses to employees who genuinely did a good job in other sectors, I don’t necessarily take issue with that. Especially if it enables AIG to keep good employees in profitable divisions.

However, AIG seems intent on issuing “retention” bonuses to the very people who created this mess in the first place. Why do they want to retain these people?

Their first argument is that they need to keep the people who understand what they created so they can help undo it. It’s a faulty argument because clearly these people don’t understand what they created. If they did, they wouldn’t have done it!

Their second argument is that these people will be hired away by other large companies. Again, who would want to hire them right now? Here’s how I imagine that interview going:
“You worked for AIG’s financial products division?”
“Yes.”
“How much money did you earn for AIG?”
“My deals cost the company $20 billion.”
“Get out of my office.”

I realize that these people will eventually be hired by other companies. We have only to look at Robert Nardelli to find proof of people failing upwards.

Are They Kidding?
Seriously. What are they thinking? These employees may have brought billions of dollars into AIG at some point, they have now cost the company over $100 billion. Billion. How can they possibly argue that paying them “retention bonuses” is a good use of money? I don’t care that it’s “only” $235 million. Part of that is my money. You want to give someone a bonus? Give it to me! Or how about using it to pay back what the government invested in you so we can start to pay down our massive federal debt, which is now more massive thanks to AIG?

There are lots of options besides paying “performance” bonuses to people who lost the company, and therefore taxpayers, gobs of money. Unless, of course, “performance” means “breathing.” In which case, woohoo! Bonuses for everyone!

When the home prices were rapidly rising, most people comfortably made high offers without worrying about the appraised value. Most of the time, the appraisals would meet the target. Now, partly due to falling prices and partly due to the new appraisal system, 20-30% of appraisals are coming in low, leaving buyers to wonder whether they should pay the purchase price or the appraised value.

Should You Buy a Home for More than the Appraised Value?
The simple answer is no. Of course, there are exceptions. If you’re buying a distressed home by a major architect at a bargain and planning to fix it up, you may well want to pay more than appraised value because it will be worth much more once it’s restored (assuming you do it properly). However, odds are good you’re paying all cash in that scenario, and may not even get an appraisal.

99.9% of home buyers aren’t in the situation, which means that 99.9% should not pay more than the appraised value, especially in a declining market.

Why You Shouldn’t Pay More
Paying more than the appraised value essentially means that you’re paying more than the house is worth. You’re losing money right out of the gate. Given that home prices in many areas may still slide downward, why would you willingly lose money on day one?

In addition, lenders will base your loan on the appraised value, not the purchase price. If you opted for 20% down, then the lender will only lend you 80% of the appraised value, which means you’ll have to produce extra cash to make up the gap between value and price. The other option is to find a different type of loan, but that will cost you much more in interest.

What If the Appraisal Is Wrong?
This does happen. If you feel the appraisal is wrong, you can get a second appraisal or appeal the first one, especially if inaccurate comps were used. However, you should carefully research the factors behind the appraisal. If the square footage is wrong, make sure that the actual square footage matches that listed on the property records at the assessor’s office. If it doesn’t, you could be dealing with an unpermitted addition. Although it would appear to increase the home’s value, it could actually cost you a bundle to correct defects in unpermitted construction.

How to Handle a Low Appraisal
In the event that an appraisal comes in low, you can do one of the three things:

  1. Make up the difference in cash.
  2. Ask the seller to renegotiate the sales price.
  3. Cancel the deal.

Personally, I would choose either two or three. With two, I would ask that the purchase price be reduced to the appraisal price. Some sellers will offer to split the difference. I wouldn’t do that, because even if you split it, you’re still overpaying. The seller may insist that they “need X dollars from the sale.” That may be true, but if the home appraised low, they’re not going to get it. They can either accept less or stay in the house.

I know it’s difficult if you really love a house, but you have to be prepared to negotiate hard or walk away if the appraisal comes in low. In this market, it doesn’t make sense to go into a home in a position of weakness.

As soon as we started looking for a home with a real estate agent, she advised me to get preliminary quotes from several insurance companies so we would be able to move quickly once we went into escrow. If you’re getting a loan, you can’t close the loan without insurance in place, and the first year’s premium will be paid through your escrow company in advance.

How to Research Homeowner’s Insurance
The initial research is simple. Follow these steps to accomplish the task in a few hours:

  • Approximate the average price, size, and age of the homes you’re looking at. In our area, that was about 1500 square feet and built in 1950.
  • Compile a list of potential insurance companies. Ask friends and relatives who own homes for recommendations.
  • Check your state insurance commissioner’s website, online review sites, and the Better Business Bureau’s site for ratings for each prospective insurer for homeowners and auto insurance (if you drive.) A combined policy will save you a few hundred dollars every year.
  • Visit the websites of three or four your top choices for online quotes. It will take a few minutes to complete the forms on each site. Most should supply you with an instant quote. For your auto quote, base your decision on the level of coverage you’ll need after you move into the home, not the lower level you most likely have now.
  • Contact your current auto insurance agent for a quote. You may get an additional discount for being an existing customer.

How to Choose an Insurer
Although you’re more likely to use your auto insurance, I decided to choose my insurance based on the best homeowner’s coverage because it has a much higher value. On the insurance websites, you can run different scenarios to adjust your cost. You can’t change the value of your home – that’s based on a formula – but you can adjust the deductible, the personal liability coverage, and a few other factors. I chose a $2500 deductible and a million dollar personal liability rider.

I narrowed it down to two possibilities, one of which is my current auto insurance company. When we went into escrow, I called each for a specific quote for the specific property. The quote I received was actually lower than the online quote, despite the home being larger than my estimate.

When making my decision, I relied on three primary factors:

  • Reputation – Does the company have a good BBB rating and insurance commission rating?
  • Coverage – Does the homeowner’s policy include the coverage I require?
  • Price – I wouldn’t automatically choose the cheapest, but I wouldn’t choose the most expensive if other factors were equal.

Once you have your quote, get the agent’s name, phone number, fax number, and any other information you need to complete the escrow form and submit it as quickly as possible. Our escrow company requires the information at least 10 days before closing to avoid delays.

At some point during the mortgage process, you’ll be faced with this mysterious item known as “title insurance.” There are actual two types of title insurance. If you’re getting a mortgage, you’ll be required to get the first type. You may also opt to get the second type.

Title Insurance Defined
Title insurance offers protection in case there is a defect in the title. That is, in case someone tries to make a claim against your house for something a prior owner did, or in the event that title was improperly passed.

Lender’s Title Insurance
The lender’s title insurance protects the lender from losses in case the title is later proven to be improperly issued due to inaccessibility of the land, liens, or defective documents.

Owner’s Title Insurance
An owner’s title insurance policy protects you, the homeowner, from losses in case a clear chain of title can’t be proven, previous fraud on a title transfer, errors in title records, or other encumbrances to your ownership.

Is It Necessary?
Title claims are rare. In some cases, a title can be clouded due to fraud, but usually it just means something was improperly recorded. As part of the title insurance process, the title insurance issuer will research the recording history and declare a clear title. If title can’t be cleared, then you don’t buy the house. However, most people can’t get past this step without first paying for the title insurance policy. In this sense, title insurance protects you from the possibility of a future problem. The premium is more of an add-on, because it’s unlikely the policy would be issued if title problems were found at the time the policy was written.

What Does It Cost?
This is the tricky part. Title insurance can cost anywhere from $800 to $2,000. Depending on your purchase situation, you may be able to choose the title insurer and negotiate the rate, but you might not be able to. Nearly 80% of this fee is commission, and only 20% is for the actual insurance premium.

Do You Buy It Annually?
Unlike homeowner’s insurance or a home warranty, you only buy title insurance once. If you refinance, the new lender may ask for a new title policy, but some insurers will offer to update your current policy at a reduced rate. If you’re refinancing, ask the title insurer about this. Of course, you will need a new policy if you sell your home and buy a new one.

The fact is, it’s not that expensive to run title searches now that most county records are digitized. While they do offer an important protection and provide an important service, it could be done for far less than title insurers currently charge. Unfortunately, they’ve dug their way into the system and there’s little likelihood that we’ll get rid of the system anytime soon.

A bit of an early blog round-up this week because I’m taking tomorrow off from blogging. Yay vacation!

This week, we first have the Carnival of Personal Finance #211 hosted by Green Panda Treehouse. In addition to my post about tax credits motivating you to buy something, I also recommend Financial Highway’s debate about the meaning of money.

Next, the Festival of Frugality #184 hosted by My Frugal Adventures.  In addition to my post about affordable ways to update your home, I also recommend Frugally Green’s tips for getting the most out of your appliances.

Finally, Money Hacks Carnival #71 hosted by the Canadian Finance Blog. In addition to my post about getting a second opinion on your first home, I also recommend Affine Financial Service’s discussion about title insurance.

← Previous PageNext Page →

Current Accounts



My blog is worth $16,371.66.
How much is your blog worth?


Finance Blogs - BlogCatalog Blog Directory