Tuesday, December 28, 2010

Sometimes I wonder...

Sometimes I really wonder how people think they are 'thinking' things through. And then I wonder how on earth we are supposed to get through these financial storms when there are seriously so many idiotic people out there. But then it's no wonder we are in this mess eh?

This stems from a discussion with my mother when she talked about how our former neighbour made her feel like she made a bad decision about selling her house in 2003. You see, mom sold it for 142,000 but only 2-3 years later, it sold again for 240,000 ish. Not sure on the actual sale price, but it was listed at 250 so I am shooting a bit below that. Anyhow, my mom said 'Yeah I could have made another 100 grand on that thing' and she seemed sad. Her old neighbour, being the busy-body that she is, made mom feel like she missed out on a small fortune. My mom now lives on widow's pension and half my dad's work pension and is technically below poverty level so thinking about making another cool hundred grand had her down in the dumps.

That made me so angry! First off, the condo mom bought flat out was 113,000 in 2003, and after moving costs and other fees she made about 25,000 profit -  but only two years later the exact same condos in her building were listing at 185,000 and up. So right off the bat I reminded mom that while she might have 'made' another 100 on top of her original sale price, she would have also dished out another 72,000 for the exact same condo. So that reduces her '100 grand profit' to only an extra 55,000. Far from 100 grand, it was only 30,000 more than what she did get as a profit.

Next - the guy who bought her house and then sold it did some work. Replaced the driveway, ripped out all the carpets and put in hardwood flooring, and tore down all the ugly 70s wallpaper and had it painted. My dad had only finished about half the basement so this guy did the rest. Tile flooring, drywalling, painting, etc. He did a lot of the work himself, but mom would have had to fork out at least $25,000 to get all that done. At LEAST. In 2003, they said she needed to do at least 20 grand worth of work and that did not include finishing the basement. So that leaves her with about 30 grand potential profit instead of 100.

That was the easy stuff to figure out. Then I reminded mom that by moving into the condo, she saved herself about $450/month in fees for utilities, property tax, home insurance, snow removal, lawn care, property tax, etc. So 2 years at 450/month is over $10,000 in fees that she would have paid to run the house as opposed to the condo.That reduces her potential profit to$20,000 instead of $100,000 as her old neighbour claimed.  She would instead have only given herself 2 more years in a 5 bedroom house with a huge lawn and driveway that was way too much work for herself health and energy-wise. I asked mom if an extra 20 grand really would have been worth all the hassle - and that's IF the house sold for 240,00 and does not include the resulting higher fees for her real estate agent's cut. So drop that 20 grand by another few thousand. She actually made MORE money (25,000) by selling in 2003 than she would have by selling in 2005 (less than 20,000).

But there are a LOT of people who think like my neighbour and my mom do. My mom has seriously been depressed over what her old neighbour said, and they have discussed it several times since my mom moved in 2003. I hope that my mom will be better armed with information if she runs into her again and can let loose with REALITY and say 'actually miss noseypot, I would not have made any money at all on the sale of that house if I had waited another 2 or 3 years because the cost of the condos went up too, and I would have been paying 3 times as much in utilities and property taxes during that time. In fact, I would have LOST profit had I waited'. I really hope and pray mom is confident enough to let it rip.

Mom could have figured that out herself if she had 'thought outside the box' for 5 seconds, but she has never had to deal with stuff like this. Dad always looked after things like that but he died suddenly and mom was on her own. My brother and I lived out of town and could not help as much as we wanted. She did the best she could. But after our Boxing Day chat when I laid it all out for her, I told her that she should be pleased that she DID move at the right time. She moved when prices had gone up, but had not gone totally bonkers just yet. She moved when it was right for her, and she did the right thing. I just wish more people took the time to think outside the box because they are the ones causing all this crap, taking stupid chances while thinking they will make a profit, and down the tubes we all go.

3 comments:

  1. I read this post with a great deal on enjoyment! THIS is why realtors earn their commissions!

    My wife was a realtor for 13 years,we could tell ya stories. While everyone outside the industry loves to tell horror stories about crooked or incompetent realtors,there are just as many horror stories coming from realtors concerning greedy, vicious, and completely unrealistic homeowners.

    Most people become "attached" to their home,emotionally,and they resent the buyer purchasing their "home", if it's where they raised their kids,the resentment is even worse than usual,and it's all taken out on the realtor.

    Your figures are very accurate, we used to see this often; my wife would list someone's house for say, $150,000,and another one down the street for %185,00. The owner of the lower priced listing would call up, furious that their neighbour was getting $35,000 more for their home.

    My wife would have to patiently explain that the neighbour's house was 200 square feet bigger,had a larger yard,and the neighbours had just spent $25,000 updating the interior. That explanation was never satisfactory,as the owners always reacted with emotion rather than common sense.

    We saw so many people who would accept what they felt was a lowball price just to get the sale over with, do vindictive little things,like remove all the plates covering light switches and wall sockets just before they left.

    I could go on for hours, but you get the picture. The worst thing anyone can do is listen to the "expert" on real estate,usually someone who has NO real knowledge,expound on how someone else didn't do their due diligence and thereby gypped their "friend" out of "X" number of dollars.

    That person is, as you said, a nosy busybody more interested in fomenting anger and mistrust than in actually doing anything to help someone. Those people are the absolutely WORST type to have as a client,and many realtors will simply cancel their listing and let some other sucker waste their time trying to satisfy them,because NO price is ever good enough,no effort ever enough to satisfy these people.

    It's unfortunate your Mother has such a "friend".

    DMOrris

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  2. Thanks! And I can just imagine what your wife has seen in that career lol. My boss in fact ran into one of those types of people who would strip a house down before moving. She bought a home with a daycare center in it and it was supposed to be 'all contents included' but she moved in only to find the whole place cleaned out. Even the DECK was removed from the back of the house, board by board, if you can believe it. It was quite a sight. It took ages going through the courts before they got some sort of settlement of a lower sale cost due to all the missing equipment and deck.

    The man who purchased my mother's house did get himself a darn good deal - or so it seems. Because he had to turn around and buy a house in Sylvan Lake AB again, where prices skyrocketed even higher than in my city. He basically would not have paid much off the actual house in those 2 years so I'm not sure where the $100,000 higher listing price got him but I'm sure he did alright. It's people that think they know everything that drive me crazy, when it's actually quite simple to sit down and think about the WHOLE picture for a few minutes. Simple math as well.

    What we have issues with right now is that we rent and everyone says we should buy since interest rates are 'so low'. Yeah well, they are low but the houses in my area are around $300,000 now! Maybe I'd only be paying $800/month on my mortgage, as opposed to $1000 for rent - but if that rate goes up even just 1% when it comes time to renegotiate, then the mortgage fees increase much more than people seem to realize. My friend and I looked at the Classic Communities houses in 2005 and punched numbers into bank's online mortgage calculator and saw that if interest rates went up less than 2% in 7 years, she would not longer be able to afford the mortgage payment that would result. Many people don't seem to realize that either. It takes a couple minutes of fiddling numbers into a mortgage calculator to look at what payments would have to be made, what top interest rate they could handle, and how much they end up paying in the end total, before deciding what's good.

    We don't want to rent, we would rather buy, but we were not in a position to when prices were decent so we refuse to get sucked in now. We missed the boat but aren't planning on capsizing ourselves anytime soon lol. My best friend's father has been in Real Estate for over 30 years and for the past 5 or 6 years he has only been dealing with rural properties rather than city. I don't think he can stomach what has been going on, and doesnt want to be selling homes to people who are going to go under in a few years if they aren't careful.

    But there are nasty agents out there too. My coworker and her husband were going to purchase their first ever home and picked a 'family friend' to deal through. He had them ready to sign papers on the very first house he showed them. Of course they liked it, they had lived in an apartment for 20 years so ANY house would have looked good to them. But I freaked out and said that house was built in the 50s and needs work and yet was still listed at 290,000!!! No way! Kitchen was tiny (they both love to cook) and there was hardly any storage despite the size of the home (small closets, etc). I could not believe their agent was going to suck them in on that one (even though it would ultimately be their own fault). What stopped them was seeing that after making all their payments, they would have paid a grand total of $660,000 and the husband said no way in heck was that house worth anywhere near that. So they are sticking with their apartment for now and using their money to travel all around the world, bought a nice camping trailer, etc lol.

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  3. You make a very good point here. Besides you should make decisions about where you live based on what makes you happy - not what makes you money. You can always get more money (it might be hard but it's possible) - you can't get the time back you spend being unhappy.

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