Wednesday, October 3, 2007

Save Money By Living in a Mall Parking Garage for Four Years

Author: Nick
Category: Money
Topics: ,

he has one of these signs on his side of the bed too

Perhaps the biggest sign yet that housing prices are a tad too high: people setting up permanent residences in mall parking garages. As the story indicates, a guy named Michael Townsend led a group of Rhode Islanders who set up living quarters behind a wall of concrete in a Providence shopping mall garage.

Apparently the Mallpartment™ (patent and trademark pending) had electricity, furniture, and… lots of parking. No running water though, but residents could just use the mall restrooms or stand under the parking garage gutters for a nice cold shower.

Michael Townsend was arrested and charged with trespassing, but he was only sentenced to probation. I know a lot of people paying hefty mortgages would have liked to see Michael Townsend go to jail for scamming his way into a rent-free apartment.

Video of Michael Townsend’s secret mall apartment [NBC10]

Thursday, August 30, 2007

Search and Ye Shall Receive: Payday Loan Jail, Property Tax Liens, and Teenage Daughters

Author: Nick
Category: Money
Topics: , , , ,

Search and Ye Shall Receive returns with more answers to questions people have recently asked search engines that brought them to Punny Money.

Jail for Unpaid Payday Loans?

payday lenders leave you out to dry but not in jail

Can I be sent to jail for not having money for payday loan? (via Google)

This person might want to consult with a real lawyer and check his or her state and local laws, but I’ll still share my view on this. I previously stated that you could go to jail for lying on a credit card application (e.g. stating you make $250,000 a year when you really make $6.50 an hour). In theory, the same could be true for payday loan applications. That said, payday lenders typically don’t collect the sort of information you would normally lie about, so the chances of incriminating yourself over a payday loan are very slim. If you’re worried about payday lenders getting you arrested for not paying your loan, you can relax. It’s illegal for payday lenders to threaten you with jail over unpaid loans. Just be sure not to write any bad checks when paying back the loan; they can still land you in legal trouble.

Do Delinquent Property Taxes Mean No Income Tax Refund?

your tax return is likely safer than your property

If you owe back property taxes, will you not get a tax refund? (via Ask)

Your Federal income tax refund is likely safe because property taxes are collected by state governments. Your state income tax refund is also probably safe, but that’s because the state has a much easier way to collect property taxes in arrears: tax lien sales. Normally once a year, counties or states will “sell” the rights to collect unpaid property taxes on a property to whomever wants to buy them. The buyer then jumps to the head of the line on most liens placed on the property (like mortgages and judgments, but not other state tax liens). When you go to sell the property, you’ll have to cough up the money to pay off those liens.

There are also tax deed sales in which your property is sold out from under you to pay off your delinquent taxes. Obviously this is far worse than just having a lien placed on your property.

So the answer to this question is no, your tax refunds will likely not be affected; but you might want to hold on to those refunds to pay for an apartment if your property goes to a tax deed sale.

How to Talk to Your Teenage Daughter?

aaaah, floating lips, nooooooooooo

How do you talk to a teenage daughter? (via Google)

Good question. When I’m talking to your teenage daughter, I usually ask these questions first:

  1. Are your parents home?
  2. You are 18, right?

Oh, you probably wanted advice on talking to your own teenage daughter. Uh, good luck with that.

Thursday, July 26, 2007

How Much Living Space Do You Really Need?

Author: Nick
Category: Money
Topics: ,

Lorne St Apartment - Before We Moved In - My Room by NZ Alex

Photo by NZ Alex

The answer: probably not half as much as you have, but we’ll come back to that.

First, this emergency news flash: Los Angeles is out of space, and people are going to fall off the edge of California and drown in the Pacific Ocean any day now. Fortunately some developers have a solution: start building 250-square-foot apartments.

To give you an idea of how big (or perhaps, how small) 250 square feet is, grab two friends and have the three of you lay on the floor head-to-toe in one long straight line. That’s about the length of one side of a 250-square-foot apartment.

Can you fit the basic amenities of life into 250 square feet of space? Well, let’s consider how much space your typical home furnishings take and see if we can cram them into these tiny apartments.

Item Space
(sq. ft.)
Queen-size bed 40
Dresser 10
Chest of drawers 10
Closet space 10
Bookshelf 10
Desk and chair 15
Couch/loveseat 30
End table 10
Shower/tub 25
Toilet 10
Bathroom sink 10
Oven/stove 25
Kitchen sink 10
Refrigerator 10
Cabinets/countertops 25
Total square footage 250

Hey, how about that! 250 square feet right on the button. Looks like those L.A. developers aren’t crazy after all.

Oh, you wanted walking space? Somewhere to stand while you cook? A bathroom where you don’t trip over the toilet as soon as you walk inside? Not gonna happen. Sorry.

Looks like the moral of this story is that living in a 250-square-foot apartment likely means giving up some of the amenities to which you’re typically accustomed. Such small apartments aren’t unheard of either; the typical Japanese one-bedroom apartment is around that size. Of course, the typical Japanese apartment doesn’t have most of the kitchen appliances listed above, a couch, or even a standard bed.

Another lesson to take away from this: if you’re a single businessperson who spends most of his or her time at work or otherwise out of the apartment, you don’t need 1,000+ square feet all to yourself. Especially if you’re renting, you may be throwing money away on extra space you’re not even using.

Before you move in to your next apartment, sit down and figure out how much space your stuff really needs. (No, you don’t need that life-sized neon-lit flamingo statue.) Once you have a square footage number, multiply it by two to account for walking-around space. That’s how big your next apartment should be to make maximum use out of your minimal space.

Wednesday, May 30, 2007

Put Down the Subprime Mortgage Application and Back Away Slowly

Author: Nick
Category: Money
Topics: , ,

stop in the name of basic human intelligence

Are you itching to buy a home but think the best you can do is an 8.75%, 5-year variable ARM with 3 points and a kick in the face? Chances are you just aren’t looking hard enough, says some guy whose job it is to stick poor suckers with ridiculous mortgage loans. Here are some startling–no, shocking numbers on how many well-qualified dummies are saddling themselves with subprime loans:

  • What is the difference between a prime 6.00% and a filthy 9.00% $300,000 mortgage payment? $600 every month, or more than $200,000 on a 30-year mortgage.
  • Fannie Mae says half of subprime borrowers can find a prime loan instead.
  • Over 30 percent of homebuyers let their real estate agent find their loan for them.
  • How many subprime but prime-qualified borrowers could have saved thousands and thousands of dollars if they weren’t lazy and dove into the homebuying process without knowing a thing about it? All of them.

So what about that other half of sub-prime borrowers who are truly subprime? Maybe they should spend a few months fixing their credit before making the largest purchases of their lives at a trashy interest rate. Then they can come back, carefully explore their mortgage loan options, and save a stupendous amount of money.

Besides, the subprime label usually indicates someone who

  • isn’t the best at handling money,
  • doesn’t have a decent down payment, and
  • can’t afford to pay an extra 25% on their monthly mortgage bill.

In other words, subprime borrower should be synonymous for “person who has no business taking out a six-figure loan.”

Thursday, May 3, 2007

Adventures in First-Time Homebuying #8: Countdown to Closing

Author: Nick
Category: Money
Topics:

jumping the hurdles on your way to closing

Photo by tomeppy

So you made an offer on a home and it was accepted. Your work is done until closing day. Time to sit back and start dreaming of how you’re going to repaint those hideous neon green walls.

Okay, I lied. You still have lots to do before closing. Here’s a brief rundown of everything you’ll need to get done in the weeks before you get the keys to your new place. We’ll go into some of these in more detail in future episodes.

Give your lender the order to proceed

All that work you went through to get a pre-approval makes this step pretty easy. If you haven’t made a final selection between multiple mortgage lenders, now is the time to do so. Next, simply call them up (or have your real estate agent make the call) and tell them to begin processing your application. You will need to supply some additional information specific to the house you are planning to purchase. With that information, your lender will do the following:

  • Order an appraisal. Your lender wants to make sure the house is worth what you’re planning to pay for it. Your lender typically won’t lend you more than the fair market value of your home since they have no way of securing loan dollars in excess of the property value. Be careful here; some lenders have been known to artificially inflate appraisals to approve loans when the house isn’t worth the price being paid.
  • Send out the underwriters. These people will scour every bit of your application and supplied information to confirm that it’s all complete and accurate. Assuming you didn’t lie or add an extra zero to your income figure by accident, this part should proceed smoothly.
  • Order a title search. Your lender wants to confirm that the house is the sellers’ to sell and that there aren’t any debts attached to it that might surprise you. You also get to pay for some insurance (creatively called “title insurance”) in case something crazy happens down the road and it turns out the house really belongs to someone else. Your bank will require a title insurance policy, and you’ll want to get one for yourself. You pay for both.
  • Miscellaneous extras. The lender will usually order a flood certification to see if your home is in an area likely to flood; if so, you’ll need to purchase a separate flood insurance policy. Many lenders also want a survey done to ensure the house isn’t violating property lines.

Oh, and even though most of these are lender requirements, you still get to pay for them. The charges will show up at closing time.

Once all this is done, your lender will let you know that your mortgage loan is approved and that the funds will be waiting for you at closing.

Arrange closing

Believe it or not, there are entire companies devoted to handling your closing day. Most closing agencies are run by lawyers since the whole process of closing on a home is legally complicated. To find a closing agency, ask friends or family in the area who they used to close. You can also ask your real estate agent for the name of a closer since he or she has probably worked with many of them and knows who the good ones are.

Your real estate agent will set things up with the closing agency. Your main job here is to show up on closing day and pay the agency’s fee.

Important note: even if your closing agent is an attorney, he or she is not your attorney. If anything, the closing agent represents the lender. Feel free to bring your own attorney to closing. Some states require you to have an attorney throughout the whole homebuying process; ours doesn’t, so we did not obtain one, and things still went fine for us.

Home inspection

An entire upcoming episode will be dedicated to the home inspection process. For now, just be aware that this is something you’ll want to get done in the first few days after an offer is accepted.

Arrange moving

This is another topic we’ll cover more later, but you should begin the arrangements for moving from your current residence early in the closing timeline. Unless you’re using a full-service mover, you should also start packing right away. Don’t wait to pack until the week before you close because that’s one of the busiest weeks in the closing timeline.

Get homeowners insurance

If you’re going to be a first-time homeowner, chances are you currently have renters insurance or no insurance at all. Homeowners insurance is similar to renters, but it’s more expensive and there are a few extra components. Most notably, you’ll now need to insure your structure and not just your belongings, and you’ll want to carry some liability insurance.

Here’s a great guide to saving money on homeowners insurance. One of the most important notes in this guide is insuring your property for the correct amount. You don’t need to insure your $300,000 single family home for $300,000 since the purchase price is for the structure and land. Even if aliens beam your house into space, the land will still be there, so only insure up to the value of the structure. If you’re not sure how much the structure is worth, you can get a good estimate from tax records or a slightly less accurate figure by multiplying the square footage by local building costs (mine’s around $75 per square foot).

As with any insurance policy, shop around for the best price.

Transfer utilities and give your landlord notice

Call the local utility companies at least a few weeks before your move-in date to set up gas, electric, and other services. You may need to contact the city to set up some services like trash, water, and sewage.

Don’t forget to cancel utilities where you currently live as you will likely be responsible for charges incurred after you move out if you don’t. Some utilities require days or even weeks notice for cancellations, so plan ahead. I recommend setting the shut-off date at least a couple days after closing just in case something goes wrong on closing day and things get delayed.

While you’re at it, remember to notify your landlord of your intention to vacate.

Put together a shopping list

Depending on your current type of residence and the kind of home you’re planning to buy, you might need to pick up some items in your first few weeks of occupancy. For example, if you live in an apartment and are purchasing a house on half an acre, you’re going to need a lawnmower.

Here’s a quick list of some items that, based on your situation, you may want to acquire before or soon after move-in:

  • New locks and keys
  • Lawn and garden equipment
  • Paint and other redecorating supplies
  • Set of tools
  • Curtains, blinds, shades, etc.
  • Snow shovel

Before dropping a ton of cash at a home improvement store, look into picking up some of these items from other places. Print and online classified, relatives and friends, and yard sales are great sources of used but still useful household items.

Schedule final walkthrough

Closing may still be weeks away, but you should allocate some time the morning of or day before closing to do a final walkthrough of the house. Consider this a mini-inspection designed to make sure the sellers have met all of their promises and the house is in the same shape it was when you put an offer on it.

Some specific things to check for during your walkthrough:

  • Make sure stuff still works. Flick the light switches, try the faucets, flush the toilets, turn the doorknobs, ring the doorbells. The final walkthrough is a sort of mini-inspection, and it’s your last chance to complain about broken items before you sign on the dotted line.
  • Confirm sellers have moved out and that they’ve taken all of their belongings with them. Sometimes the sellers will remain until after closing, so this point may not apply.
  • Take inventory. You probably agreed that certain items like appliances would be left by the sellers. Double-check that everything that is supposed to be there is still there.
  • Look for moving damage. Check for dents in floors or walls that may have been inflicted on the sellers’ move-out day. Some problems may be pre-existing but will only become apparent after rugs or furniture are removed.

Bring your real estate agent in case there are any last-minute issues that the sellers need to address. Your agent can phone the sellers’ agent immediately and get the ball rolling on such issues so that delays in closing can be avoided.

Other stuff

Some areas have special rules requiring you to jump through various flaming hoops of legalese before you move in. Your real estate agent will help you navigate local ordinances.