C40 wrote:Bluenote -- on the PP / investing.. I think it's mainly that the PP depends more directly on public OPINION, and dividend payment depend more-so on actual business/behaviors. .
I agree in the short term the PP will be valued more heavily on things having nothing to do with the value of the underlying assets. However in the long term underlying supply and demand of the assets should roughly track present value of the expected future cash flows that the assets generate. Nonetheless it is always gut wrenching to watch your principle dive when it is something you are going to be relying on for income in the future. That's the beautiful thing about focusing on dividends, the market dives actually become golden opportunities because yields increase saving you years of compounding.
I think the appraisal being lower than the selling price is a big deal.
Despite his bad decisions, that appraisal could be used as a basis for future valuations.(if you sell) My advice would be to get another appraisal and see if the professional consensus is that you are paying to much.
House buying IS stressful but don't give in to the situation by accepting a deal that wont benefit you long term.
BlueNote wrote:That's the beautiful thing about focusing on dividends, the market dives actually become golden opportunities because yields increase saving you years of compounding.
This is true. The problem is that few people seem to be able to follow through on this when market dives actually happen. It's one thing to contemplate buying and holding through bear markets hypothetically, but it's another when the market value of your portfolio is down ~50% as in a typical recession, or ~90% as in 1929-1932, and people are talking about the collapse of the US and peak oil and going back to barter etc. The overwhelming majority capitulate under these conditions.
If you're part of the minority that can stick it out without undue stress, god bless. I know I'm not.
BlueNote wrote:
If you're part of the minority that can stick it out without undue stress, god bless. I know I'm not.
I don't think I could stomach a 100% allocation in dividend growth stocks during a 50+% downturn. I would need an allocation in other areas (Bonds, cash, real estate) in order to stomach the downturn in my current situation. The dividend income would definatley soften the blow for me though, knowing that the underlying earnings were still sound enough to provide the income.
House buying is another glimpse into the crazy world of "normal".
We are using a facilitator to sell our house (just a little more than a lawyer, but more perks, like a for sale sign and MLS listing). He warned us that people are so strapped they are going to ask us to pay for their closing costs. Um, okay, we are open to negotiating. Also, how the most popular financing is FHA due to only requiring 3.5% down. What, really? You think you are ready to buy a house and that is all the cash you have?
Someone came to see our place and said no yesterday because it needed work and it was too much in addition to the list price. Honestly, it doesn't need much, also long as you don't count granite counter tops and stainless steel appliances as a 'required' upgrade.
I guess I am just appalled at
1. How strapped everyone seems to be, and still getting in further
2. How unrealistic the view is of what is necessary.
You are in a great position having cash, and a realistic view of home
ownership costs. Except now you have to deal with the opposite side of strapped owners!
So I got out of the contract on that house. The seller wouldn't budge on any of my inspection demands and that was enough for me. I've moved on to another house I liked during my first trip. The seller came down a fair amount from his list price. Inspection soon. I think this house will appeal to a wider range of buyers than the first one. (The first one had a big tree free yard - great for a big garden, but barely anyone gardens in this city. Also the first house had an older, retro style kitchen (the good parts of retro, not bad). The newer house has much newer looking kitchen. It has cheap stuff though - it is actually not as nice as the retro kitchen in the first house, but most buyers would prefer it just because it looks newer.
That is good to get out of the contract. Now is the cheapest time to walk away from a bad house.
Who paid for the inspection and the appraisal? As the buyer, I always paid for these after agreeing on the price. It seems you and the seller, hadn't agreed to a price yet.
I have bought a couple houses as "light" projects at 30% off retail. (light = Painting, refinish hardwood floors, kitchen counters, bath update). My personal retail value was based off my comparables, and county appraisal of the house.
The appraiser valued them at my buy price (or slightly higher). I felt this was just to make the banks able to give a loan. I saw this appraisal as expensive paper, and not an accurate reflection of the market. It, also, didn't capture the potential of the work I wanted to do.
The most important part now is to have a good plan, and be confident that your new house will be a good place for you and your money.
- My employer pays for the inspections and appraisals. Basically all of my home buying costs are paid for through my employer's relocation package.
- We had agreed on the initial purchase price. As is common (at least in Missouri and I think in most states) negotiations open back up after the inspection. For similar homes in the area, it is common to have a few thousand dollars of concessions related to the inspection.
- The appraisal business has changed quite a lot since 2,009. It seems to be just as much of a racket as is was before that. The big banks still have things set up in their favor - just different methods. (I believe the big banks now own the AMCs - Appraisal Management Companies - which keep around HALF of the appraisal costs. Appraisers make about half as much per job as they used to, so now they try to do them in half as much time)
---------------------------------------------------------------- SPENDING DETAILS Travel – $594 - Going to Vegas in August for a friend’s wedding. Party time! Plane tickets are expensive. Friends are partnered up now and don’t want to spring break it (share a hotel room with ~4 people). Relocation - $123 – Trip for home inspection. Slept in my car. Yeah! Transportation - $124 for 6 months of insurance. $25 for oil and filter. $42 gas. Entertainment - $100 into the hobby jar.
---------------------------------------------------------------- RELOCATION House buying:I’d had a contract for purchasing a house. A number of things did not go well. The appraisal was 20% lower than the offer price. I thought it was inaccurate but it certainly worried me. The inspection turned up a fair amount of things – some I wasn’t aware of from my walkthroughs. The seller would not budge on my concession requests, so I got out of the contract. I moved on to another house I liked and now am under contract with that one. I had the inspection last week and it went pretty well – no surprises. Many things there are newer or in better shape than the other house (Utilities, electrical, plumbing).
Roommates: I'm thinking I'd like to get a roommate. The rent money would be nice, and I'll be traveling quite a lot for work and I'd like to have someone at the house while I'm out of town. So I'll need to investigate how to find a good roommate.
---------------------------------------------------------------- CAPITAL I’ll be really close to hitting $250,000 in August. I get about $10,000 lump sum for relocating and that gives a nice bump. Starting to read about dividend growth investing.
Welcome to the Lou! We've lived here for 8 years, near Forest Park. I haven't been on this site in a while--sorry I didn't see your recent posts until your house search was over, but it looks like it worked out great. My partner's a musician and I'm into native plant gardening, so if you want to know anything about either of those subjects in the area, we can maybe help.
Nice place. Based on the style/age, I'm betting the interior has a lot of character you don't find in most cookie cutter new construction. What area of STL is that neighborhood in?
