Saving on Real Estate Commissions

The process of buying and selling real estate generally includes high transaction costs, which make it cost prohibitive to enter such transactions often, unless a hot market exist where appreciation is quick and high. The United States has experienced a real estate boom over the past 4 years, which has provided homeowners with generally high appreciation in a relatively short period of time. This has especially been true in the coastal markets where real estate is up over 100% in some areas. These factors have eased the pain associated with paying high real estate commissions, but as markets cool and appreciation slows the “Commission Pain” will begin to intensify for a greater number of people. That brings us to the point of this article… “Saving on Real Estate Commissions.”

As the seller of real estate pays the commissions it is in his/her hands to control the costs this transaction. There are many ways the seller can save on real estate commissions, but the easiest way is to simply do business with real estate companies that don’t charge the average 6% commission on a real estate transaction. It is especially easy to find real estate professionals who charge less than 6% in a hot real estate market. The other method to consider is the “For Sale by Owner” method. With the proliferation of the Internet, the “For Sale by Owner” method has become increasingly popular, and increasingly easier to successfully sell a house using this method. This method will cut your real estate commissions to zero. Most escrow companies can handle a “For Sale by Owner” real estate transaction, and are happy to do it. You will pay the standard escrow fees, but absolutely ZERO in real estate commissions. That’s a savings of $12,000 on a home that sells for $200,000. We encourage you to be willing to spend about $500-$600 on advertising your home. Highly targeted and highly successful advertising can be done online.

The other side of this transaction is the buyer. In today’s real estate world most buyers retain a real estate agent know as the “Buyer’s Agent.” In a standard real estate transaction consisting of the seller’s agent and buyer’s agent the 6% commission is split 50-50 between the two agents. The buyer can potentially benefit from this situation immensely. If the seller is selling a home through the traditional means involving real estate agents etc., then the buyer will greatly benefit by retaining an agent that is willing to rebate back to them 1%-2% of the real estate commission. The purchase of a $200,000 home with a 2% rebate yields cash back of $4,000. This money can be used to cover closing costs or points associated with your mortgage loan. This is money that will be received in addition to closing costs requested from the seller as part of closing the real estate transaction.

In short…when buying or selling real estate do your homework. The wise consumer will seek out and find ways to control the cost of exchanging real estate. Remember, it’s your money, don’t just give it away.

The following are links to companies that aid the consumer in saving on real estate commissions.

http://www.ziprealty.com/ - Offers 20%-25% rebate to Buyers/Sellers

http://www.forsalebyowner.com/ - Very successful way to Sale by Owner

Help-U-Sell Real Estate - similar to FSBO – more help offered

FSBO Information

Bankrate.com - Negotiating Real Estate Commissions

Also search your local area for real estate professionals willing to negotiate their commission rates.

Existing Home Sales Surge!

A report from the National Association of Realtors showed sales of existing homes rose 2.7% from October to November to an annual rate of 6.94 million homes. This was a 13.2% increase from November 2003. This report comes after two other reports revealed November new home starts and sales decreased 13% and 12% respectively.

As reports of this nature continue to be released, and appear to be conflicting, the general consensus among experts is to "Proceed with Caution." As you shop for that perfect home keep in mind how long you plan to live there, and whether your home will appreciate enough in that time to cover selling expenses, and provide you with equity to roll over into your next home. The last thing you want is to buy a home at the top of the market and be forced to sell at a loss.

The following are links to related articles:

CnnFn - Existing Homes Sales Up

CBS Market Watch - Mortgage Rates Rise

Sarbanes-Oxley and its Effects

The Sarbanes-Oxley Act of 2002 requires public companies to document and test their internal control structure to ensure the minimization of fraud within the company. It also requires the public company’s external auditor to test those controls and then issue an opinion on the effectiveness of the internal control structure over financial reporting.

The Sarbanes-Oxley Act of 2002 was largely the result of the financial reporting failures of Enron, WorldCom, Waste Management, and others. The utopian goal of the law was to obviously prevent another Enron or WorldCom. The overlooked effect was the exorbitant cost of compliance. According to FEI surveys, the cost of compliance has soared 62% from original estimates. An FEI survey conducted in July 2004 of 224 public companies with average revenues of $2.5 billion found that the average cost of compliance to be estimated at $3.14 million.

This may sound minuscule compared to $2.5 billion in revenues, but smaller public companies with much less revenue will no doubt suffer from this burden. It may force smaller public companies to seriously consider ways to take the company private.

Many of you may be wondering… “How does this affect my investments?” Simply put, when the external auditors begin to issue opinions on the internal controls of their public company clients it is entirely unclear how the markets will react. If a company receives a clean opinion, will its stock soar? If a company receives an adverse, or disclaimer of opinion, will its stock drop dramatically? All of this is unclear. Most of the large financial networks such as CNBC rarely cover anything to do with Sarbanes-Oxley compliance and its effects on stock price. This only continues to promote ignorance on the part of the average investor.

The dilemma we face is if markets do not react, then companies will not take Sarbanes-Oxley compliance very seriously. However, are large fluctuations in the market worth it? Is the risk of fraud really that great? Will Sarbanes-Oxley compliance really protect the average investor? All these questions seem to be unanswered.

This article is strongly requesting your feedback. We want to hear from the average investor.

We especially welcome public accountants and stock analysts to share their opinions on this matter.

Please post your comments in order to help the average investor gauge the effects of Sarbanes-Oxley. Click Comments Link to Post Comments.

Links to related articles:

SmarPros - Covers Cost of Compliance

Consumer Finance Still Out of Balance

All things continue to make clear that consumer finance is still out of balance. The US has evolved from a saving nation to a colossal debtor nation. Our national savings rate has fallen below 2%; the lowest in history. From 1980 to 1994 the US saving rate averaged 8%. That's a 5% drop in 14 years.

What's happened to the average American? Why have most Americans not prioritized saving? The answers to these questions are as varied as the selections at a Las Vegas buffet. No one reason will ultimately explain this trend. However, one thing is clear, if Americans do not start to prioritize saving, they risk loosing their self-reliance later in life. In our prime earning years we become very accustom to self-reliance. This independence is slowly eroding away for Americans who are not prioritizing saving for retirement.

The time to start saving is now. No matter your economic position in life, refuse to believe you don't have enough money to start saving. Careful analysis of your budget will most likely reveal where you can cut the fat and pour that money into tax deferred investment accounts. Even if you start with as little as $25 a month. It's a start. It will create a habit that will serve you well as you are able to save more money as your income increases over time.

Links to articles covering similar subjects below:

Federal Reserve Article - Low US Savings Rate

CnnFn - Charged Today. Tapped Out Tomorrow

Edward Jones - Solutions to Investment Goals

Related Wiser Money Articles: December 2004 Archives

The State of Consumer Finance
Saving and Investing in Everyday Life

Year-End Stock Advice

The last week of the year is usually quiet on Wall Street with stocks generally up, however, the Dow Jones Industrial Average was down 51 points today. Most investors are not worried about today’s losses and think the market will recover by weeks end. For the average investor a few things to consider prior to years end are:

1 - If you are currently in a loss position and are not optimistic about the stock’s recovery; consider selling by December 31, 2004 for tax purposes. Your capital losses can be written off against capital gains for the year, thus reducing your tax liability. If your capital losses exceed your capital gains, the losses can written off against “Other Income” on your tax return up $3,000 a year for married filing jointly and $1,500 a year for single tax filers.

2- If you are in gain position and are contemplating selling the stock; consider postponing that action until after the first of the year to delay the realization of the taxable gain until tax year 2005. This allows you keep more money in your pocket now versus handing it over to IRS right away. You get the benefit of compounding interest not the IRS.

3- After you have deferred the maximum into your 401k, consider maxing out your IRA or ROTH IRA contributions. The IRS will allow you to fund your IRA or ROTH IRA for tax year 2004 until April 2005. This allows taxpayers more flexibility in saving for retirement.

4 – Most importantly remain calm. Don’t panic if stocks lose some of their recent gains this week. If your investment plan is long-term you will be fine. For those investors looking to reap short-term gains; keep your eye more closely on the market so that you can buy / sell at the best time.

For more information on capital gains tax laws follow the links below:

IRS Captial Gains Rules

Yahoo Tax Center - Capital Gains

Ivestopedia 5 Tips For Investors

DVD Rental Market Heats Up

The DVD rental market continues to heat up. The major players; Netflix, Blockbuster, and Wal-Mart continue to duke it out for control of the online DVD rental business. Hollywood video has decided against entering the online DVD rental market due to financial reasons. Blockbuster is currently in talks with Hollywood Video about a possible acquisition of the company.

Blockbuster was spun off from Viacom this year through a one-time special $5 dividend, which to many signified the end of the traditional movie rental business. However, it was just the beginning of the Blockbuster blood torn war. Blockbuster launched its online rental service in the Fall of 2004 with the hopes of playing catch up in the online rental market. It has since been a fierce competitor drawing blood with every swing. It has vowed to take control of the online DVD rental market and remain the king of the traditional rental market. Blockbuster continues to lower its online DVD rental price and change its in-store policies in favor of the consumer. All these moves continue to bloody Netflix as it has seen its stock fall from its $40 high to around $11. The Blockbuster moves due little damage to Wal-Mart’s stock, as this business is just a tiny fraction of Wal-Mart’s revenues.

The question remains. Which service is the best value for the consumer? Here is how the three services stack up:

Blockbuster:
Price per month: $14.99 guaranteed through January 2006.

Price includes the following:
Ø Unlimited online DVD rentals – 3 rentals out at a time
Ø Two free in-store movie or game rentals per month
Ø No return dates (online rentals)
Ø No late fees (online rentals)
Ø Free return shipping (online rentals)
Ø More than 25,000 DVD titles available

Netflix
Price per month: $17.99

Price includes the following:
Ø Unlimited online DVD rentals – 3 rentals out at a time
Ø Free return shipping
Ø 25,000 DVD titles available

Wal-Mart
Price per month: $15.54

Price includes the following:
Ø Unlimited online DVD rentals – 2 rentals out at a time
Ø 16,000 DVD titles available

All three services offer some form of a free trial.

Please the visit the following links below for more information.

CnnFn Article
Latest Blockbuster Move

Blockbuster Online Rental Service

Netlfix Online Rental Service

Wal-Mart Online Rental Service

New Home Sales Drop Dramatically!!

The government's new home sales report for November 2004 shows signs of weakening in the housing market. New home sales dropped a whopping 12% in November 2004. A week ago a report on housing starts showed a drop of 13% in November 2004. The supply of new homes on the market has risen to 4.5 months; the highest in 2 years.The big home builders continue to feed us the story of a robust no stop housing market, but these numbers are telling a different story. For buyers looking to live in a home for less then 2-3 years, it would be wise to proceed with caution. Buyers who are purchasing a home to live in for the next 5 to10 years should fair ok, barring some unforeseen event in the housing market.


Related Articles:

CnnFn-Housing Starts Tumble

CBS Market Watch - Blizzard of Data

Saving & Investing in Everyday Life

When it comes to saving wisely there must be an undying desire to spend wisely. The less disciplined you are about your spending the more likely you are saving unwisely. Disciplined spending takes practice and determination. It is always easier to spend here and there on goods and services you want versus delaying gratification for the long-term greater good. As you discipline your spending and begin to notice positive effects it will fuel your motivation to continue to spend wisely.

Once you have reigned in your spending you can then begin to focus on saving wisely. Saving wisely is at the heart of building wealth and financial security. It is the ability to properly allocate your wealth among high returning diversified investments. The average investor accomplishes this by investing money in mutual funds with various investment objectives. This ensures your money is allocated among many different stocks that meet the investment objective of the mutual fund. Your investment risk is minimized because it is highly unlikely that all stocks held by the mutual fund will decline at the same time. It is much more probable that some will fall and others will rise, thus minimizing your exposure to the loss of capital (Initial Investment).

A long-term approach to investing in the stock market will allow you to ride out the downturns and benefit tremendously during the upswings in the economy. The stock market has returned a consistent 10% to 11% over the past century. That means a measly investment of $1,000 for 20 years investing an additional $100 per month would result in $83,265. Most people with any kind of disciplined spending could easily invest a $100 per month. Now consider you start with $5,000 for 20 years at 10% with an additional investment of $200 per month, which yields $188,514. Now suppose you start with that same $5,000 for 30 years with an average return of 10% with an average investment each month of $400 and it yields $1,003,382. Not bad considering 10-15 years from now $400 will seem like nothing, and you can up the amount you are investing and yield well over a million dollars. Now couple this investment with the home you have been paying off for the past 15 to 30 years and you have yourself a pretty nice nest egg at retirement. The key is to START YOUNG. START YOUNG. START YOUNG. You have time on your side. Time more than money makes the biggest difference. People who start late saving for retirement have to play catch up for many years to retire with the same amount of money as the person who started 5 to 10 years earlier.

As mutual fund choices are vast and sometimes confusing the Wiser Money blog recommends the following four mutual funds:


ABALXAmerican Funds American Balanced A (ABALX)
CWGIXAmerican Funds Capital World G/I A (CWGIX)
AGTHXAmerican Funds Grth Fund of Amer A (AGTHX)
AIVSXAmerican Funds Invmt Co of Amer A (AIVSX)

We not only recommend these mutual funds we have our own money invested in these mutual funds. The return has well exceeded our expectations. Information can be obtained about these mutual funds at http://www.yahoo.com or http://www.cnnf.com or http://www.cnbc.com. The ticker symbol above can be used for researching the mutual funds at the various financial portals.

Specific questions concerning these funds can be addressed in the comments section of the blog and will be answered.

Also see the following link concerning saving money:
66 Ways to Save Money

Continue to focus on Saving Wisely, Spending Wisely, and Living Wisely.

Privatizing Social Security

President Bush answered questions today regarding his proposed reforms about Social Security. Estimates about the cost of the reforms are across the board with the most common estimate at 2 trillion dollars. However, President Bush proclaims the cost of not doing anything to be far more expensive. According to leading estimates the Social Security fund will not have the capacity to pay out 100% of entitled benefits by 2042 to 2052.

Do you think Private Accounts are the solution to the Social Security problem?

Please post your comments to this question as it will benefit all readers.

The Power of the Consumer

Economically speaking, “In the hands of the consumer lies all power.”

Many of you may be saying, “Absurd, ridiculous, as if the consumer held any weight in the economic game carried out each day.” No doubt all of us at one point have felt helpless or powerless against the corporate giants we purchase goods and services from each day. We have all experienced downright horrible customer service, and quite possibly dodgy practices. Lets be serious for a moment…if the executives of Enron were willing to create off balance sheet partnerships to hide debt from its shareholders and enrich themselves, then it is all but guaranteed they would have screwed the consumer at first bite. And in fact they did. Enron manipulated much of the California Energy Crisis of 2002 for the “Pure Love of Money.”

While the Enron example is an extreme one. There are many instances in all of our lives where we felt maltreated by the companies we purchase our goods and services. Whether it was an unclear return policy, a defect product with no warranty, or just outright horrible customer service; we have all experienced it. The question is, “What are you going to do about it?” Are you going to just sit back and say, “I stand no chance against this great army. I will be crushed in an instance.” If the answer to that question is yes…then you will be crushed. In fact, almost all of us stand no chance against the corporate titans alone. Standing alone they will always dictate the terms of our patronage. Alone in the world…they hold all the cards. Remember that… “Alone in the world…they hold all the cards.”

When we discover the reality of standing alone, we discover the power of standing together. As we play this economic game each day, we can play it alone or together. If we choose to play it alone then we play on their (Corporations) terms. If we choose to play this game together then it will always be on our terms. But how is this so, you may say. It is so very simple, but so very complex. It is simple in the sense that if a movie theater charged outrageous prices to see a movie and every consumer in the area just simply boycotted the theater then either they would lower their prices or face extinction. Now what do you think they would choose? It is so very complex in the sense that you have to get numerous, rational, intelligent people to choose to act in harmony. It is hard enough for a choir director to get willing intelligent people to sing in harmony, now try getting unwilling intelligent people to act in harmony. That my friend is the key. Any rational intelligent being wants lower prices…but most are not willing to do what it takes to get those lower prices.

This example is very simple, but think in terms of the masses acting in harmony to get goods and services at prices they see as reasonable. The super overpriced coastal real estate markets could be crashed overnight. Something that would be dire for those who have leveraged themselves to the tilt to get in, but a Godsend for those priced out of markets that are so overvalued it is an underlying detriment to the local economy. All it would take is a large enough of real estate buyers to simply leave the market for a time, and sellers would be forced to lower prices in order to get people to reenter the market. This could only be accomplished if all the buyers acted in harmony. An almost impossible feat.

As the publisher of the Wiser Money blog, I hope this article has instilled in your mind the power of the consumer. We truly do hold all the cards when we act in harmony.

Harmonize the consumer…take back the world.

2004 Tax Changes

The 2004 tax year is quickly coming to a close. Its time to get updated on the 2004 tax law changes if you have not already. The following link will summarize all the changes very nice for you. This link is highly recommended and worth reviewing. Remember smart tax planning is an integral part of living wisely.


http://moneycentral.msn.com/content/2004law.asp
Great Tax Information - Summarized Very Nicely

HOUSING STARTS TUMBLE!!!!

Housing starts drop 13% in November. The sharpest decline in 11 years.

What does this mean for the housing market? Is the bubble about to burst? What are the wiser decisions now? More to come on this story later. In the mean time check out these links to websites covering the story:

Housing Starts Fall Article
Brief and to the point.

Rent vs.Buy Article The Rent vs Buy dilemma. Advice and tips given the current market.

Great Real Estate Articles

The following are a few links concerning real estate that are worth checking out:

Short CnnFn Article Quick read.

CnnFn Home Equity Advice Don't Gamble with your home equity - short

The Real Estate Investment Club The new social craze - Real Estate Investment Clubs

Fortune Magazine Article Good Article - full text requires subscription.

Save Wisely, Spend Wisely, Live Wisely.

Rising Interest Rates and Their Effects

The Federal Reserve raised short-term interest rates another quarter point today. That marks the fifth rate hike in 2004. The real questions are what is the Federal Reserve trying to accomplish and what does it mean to you...the consumer.

The goal of U.S. monetary policy according to a 1977 Amendment to the Federal Reserve act is to: Promote maximum sustainable output and employment and promote stable prices. The Federal Reserve accomplishes these objectives primarily by (1) raising or lowering the discount rate (what happened today) and (2) buying and selling government securities in the open market.

The Federal Fund Discount Rate is the rate at which sound banks must pay to borrow money from the Federal Reserve. As the financial institutions we deal with each day now have to borrow money at a higher cost they then pass on those costs to the consumer, which results in higher interest rates on credit cards, adjustable rate mortgages, installment loans, etc.

When the Federal Reserve buys and sells government securities in the open market from financial institutions it increases or decreases the money supply. The Federal Reserve increases the money supply when it buys government securities from banks thus providing banks with more liquid money to lend out. The opposite is true when the Federal Reserve sells government securities in the open market.

The Federal Reserve is currently following the policy of increasing the discount rate and selling government securities in order to curb inflation. The less money in circulation, the less spending that occurs, and hopefully this will curb high inflation.

Now the question is...what does the wiser person do with their money now? Their are many differing opinions and all have their rightful place. The Wiser Money blog is recommending the following actions:

• Pay down credit card as fast as possible - the cost of credit card debt is staggering and most of us would be scared if we actually knew how much interest we are paying on credit card debt. ALWAYS PAY MORE THAN THE MINIMUM PAYMENT.
• If you plan to stay in your home past five years lock in 30-year fixed rate mortgages. Your income will increase and the slightly higher payment now will seem like nothing in 5 to 10 years.
• Think twice about a home equity loan. If you really don't need...don't use it. Invest the money you would have paid on the home equity loan.
• Evaluate whether the money you have in institutional savings accounts is earning a fair return. See links below for high interest bearing accounts for consumers.
• Don't pull money out of the stock market - the market is strong and young consumers can weather a storm that may or may not come.
• Avoid purchases on credit cards and store charge cards as much as possible. If you don't have the cash then seriously evaluate whether you need the good or service.

The following links have deemed worthy to be published in the "Wiser Money" blog:

High Interest Bearing Accounts:

• http://home.ingdirect.com/ - 2.25% interest bearing account - no minimums - no fees A++
• http://www.geinterestplus.com/interestplus/index.html - 1.85% to 2.35% - A

Federal Reserve Information:

• CnnFn FED Article - Article
• Federal Reserve Board Introduction - an introduction to the Federal Reserve and its policies. Very informing. Great for research.

Paying Down Credit Card Debt:

• http://www.bankrate.com/brm/news/cc/19980713.asp - Tips and Advice

Remember to Save Wisely, Spend Wisely, and Live Wisely.

The State of Consumer Finance

The state of consumer finance in the United States has continued to deteriorate over the last decade. Consumers addicted to spending continue to pile on more and more credit card debt as if the payment will never come due. And with interest rates being at historic lows fueling a housing boom throughout the country many if not the majority have tapped precious home equity for must have luxuries of today all at the expense of their overall financial health now and in the future. Consumer spending has become like an unchecked sexual appetite that will no doubt consume all the time, talents, and abilities of the creature thus leaving it in ruin. The best of us are giving in to the animality of our natures. We are disregarding our best judgment in pursuit of ever more tangible goods. And with each and every purchase we experience diminishing returns, thus fueling more purchases to achieve that euphoric high of shopping. At best it is comparable to the drug addict who after each high drops lower and lower until he is consuming drugs simply to feel normal. A vicious cycle where nobody wins.

It is no surprise that the state of consumer finance is near disaster. From the moment we can understand what Santa Clause is until we are 18 and receive that first credit card application we have been raised in a culture that continually promotes "Instant Gratification." It is always buy now...Pay later. Why wait? Why delay? Why sacrifice? It is the principle of sacrifice and delayed gratification that have gone largely untaught in America's modern society. The line between needs and wants has become ever so blurred in our modern day society. Savvy advertising has convinced us that wants are needs, and to go without is simply starving ourselves of a life sustaining substance. The idea of saving money to buy the next toy has given way to charging it to the only credit card not maxed out. In short...If you are to take control of your finances you must begin to seriously distinguish between needs and wants, and learn to sacrifice the unnecessary wants of today for the healthier financial and emotional future of tomorrow. I say emotional because our current state of financial affairs tends to directly effect our overall emotional health. I would like to strongly say at this point that our financial decisions create this unpleasant state of affairs and not the fact that we do not make enough money.

The "Wiser Money" blog is being published to provide practical advice to consumers on how take control of their spending and begin to achieve total finanical health through wise and practical decisions. It will also provide links to sources and companies that are deemed to provide practical advice and great bargains to consumers.

Our first link is a related article pulished at CnnFn. The link is: http://money.cnn.com/2003/10/02/markets/consumerbubble/

The article is short and informing and worth the quick read.

We welcome and encourage all feedback.