[Chance the Gardener]

Assessor’s burden:

Bugs, I agree, but isn’t it the assessor’s burden to show that the purchase price is not the full cash value? I rely on section 110 of the California Revenue and Taxation code:

“(b) For purposes of determining the “full cash value” or “fair market value” of real property… being appraised upon a purchase, “full cash value” or “fair market value” is the purchase price paid in the transaction unless it is established by a preponderance of the evidence that the real property would not have transferred for that purchase price in an open market transaction. The purchase price shall, however, be rebuttably presumed to be the “full cash value” or “fair market value” if the terms of the transaction were negotiated at arms length between a knowledgeable transferor and transferee neither of which could take advantage of the exigencies of the other…“

[Chance the Gardener]

Assessor’s burden:

Bugs, I agree, but isn’t it the assessor’s burden to show that the purchase price is not the full cash value? I rely on section 110 of the California Revenue and Taxation code:

“(b) For purposes of determining the “full cash value” or “fair market value” of real property… being appraised upon a purchase, “full cash value” or “fair market value” is the purchase price paid in the transaction unless it is established by a preponderance of the evidence that the real property would not have transferred for that purchase price in an open market transaction. The purchase price shall, however, be rebuttably presumed to be the “full cash value” or “fair market value” if the terms of the transaction were negotiated at arms length between a knowledgeable transferor and transferee neither of which could take advantage of the exigencies of the other…“

[Chance the Gardener]

I definitely have been assessed $100K more than the purchase price. I received a supplemental assessment and talked to the appraiser to confirm that the assessment was not a clerical error. For purposes here, lets assume I paid $500,000 and the assessment was for $600,000. The previous owner’s assessment was $650,000.

You are right, however, that my current tax bill is based on the prior owner’s assessed value. That is not what I am worried about, as I know that if I pay based on the $650K assessment that I will get a refund on the next supplemental roll.

When I spoke with the assessor’s appraiser, he told me that he looked into comparable sales in my building because I had gotten such a good deal and because I purchased the property out of foreclosure. I did not purchase the property out of foreclosure, I purchased the property from a bank who purchased the property from another bank who bought the property at auction. The property was listed on the MLS in excess of 30 days when I made my offer at asking. I was represented by an agent, and so was the bank.

[Chance the Gardener]

I definitely have been assessed $100K more than the purchase price. I received a supplemental assessment and talked to the appraiser to confirm that the assessment was not a clerical error. For purposes here, lets assume I paid $500,000 and the assessment was for $600,000. The previous owner’s assessment was $650,000.

You are right, however, that my current tax bill is based on the prior owner’s assessed value. That is not what I am worried about, as I know that if I pay based on the $650K assessment that I will get a refund on the next supplemental roll.

When I spoke with the assessor’s appraiser, he told me that he looked into comparable sales in my building because I had gotten such a good deal and because I purchased the property out of foreclosure. I did not purchase the property out of foreclosure, I purchased the property from a bank who purchased the property from another bank who bought the property at auction. The property was listed on the MLS in excess of 30 days when I made my offer at asking. I was represented by an agent, and so was the bank.

[Chance the Gardener]

I definitely have been assessed $100K more than the purchase price. I received a supplemental assessment and talked to the appraiser to confirm that the assessment was not a clerical error. For purposes here, lets assume I paid $500,000 and the assessment was for $600,000. The previous owner’s assessment was $650,000.

You are right, however, that my current tax bill is based on the prior owner’s assessed value. That is not what I am worried about, as I know that if I pay based on the $650K assessment that I will get a refund on the next supplemental roll.

When I spoke with the assessor’s appraiser, he told me that he looked into comparable sales in my building because I had gotten such a good deal and because I purchased the property out of foreclosure. I did not purchase the property out of foreclosure, I purchased the property from a bank who purchased the property from another bank who bought the property at auction. The property was listed on the MLS in excess of 30 days when I made my offer at asking. I was represented by an agent, and so was the bank.

[Chance the Gardener]

I’m not a lawyer and this is not legal advice.

Review your sales contract. Most builders include language that waves the “implied warranty of habitability” in lieu of an express warranty. Absent a waiver clause, a court will find that a builder impliedly warrants that a building is free from defective materials and is constructed in a sound and workmanlike manner.

It may be that a court would find a waiver clause unconscionable and thus void. In looking at the clause, the court would likely consider whether the waiver was adequately conspicuous in the contract, whether the buyer was allowed sufficient time to review the contract and the opportunity to consult an attorney, whether the builder would have allowed the clause to be stricken rather than loose the buyer, whether the express warranty offered in the clause was substantially comparable or exceeded the implied warranty, whether the builder charged for the express warranty, and finally whether that charge was excessive.

If your problems are serious you should consult an attorney and have him review your contract in light of the implied warranty of habitability and recent California statutes and judicial decisions.

[Chance the Gardener]

SD Realtor…

Feel like typing yet. I just closed on a place for $625k that was previously assessed at $853k. So at closing (where I paid taxes for the period from 4/19 to 7/1, or 73 days), I paid a little over $500 more than what the taxes should have been [(853k-625k)*1.12%/360*73]. Can I get this back? From who? How?

Thanks

[Chance the Gardener]

Wow… that is a lot of power, and a lot of water. We should probably start learning how to conserve too. One way might be to stop growing rice in California. How is that a good idea. Rather than send money to Indonesia… why don’t we just let them grow all of the rice. Or, alternatively, we should grow rice where we have more water. This should be extended to any crop that demands extreme amounts of water. It just doesn’t make any sense. I know California has good dirt, but that’s only one part of the equation.

[Chance the Gardener]

Offshore Nuclear Power/Desalination plants… that’s the answer. We can store the waste in the empty Lake Meade.

[Chance the Gardener]

Sensible?

The book was written in 2007 when not even the most zealous optimist is willing to say that real estate will appreciate in the short term. The authors advise you to leverage your money so that you can invest in a stagnant or falling asset?

Furthermore, there is little hope that interest rates will do anything but go up in the near term. Certainly, if you can make more on the bank’s money than your after-tax cost of borrowing it then paying off your mortgage early doesn’t make sense. I just don’t see how that can be done in this RE climate.

In this market, not borrowing at all seems to make the most sense. Why not rent and invest the money you save not paying interest, taxes and HOA’s. Hopefully the recent tightening in lending practices will prevent the “undisciplined spendthrifts” from attempting to implement the author’s dubious advice.

[Chance the Gardener]

We don’t have any kids, and I’m not sure how I could do this if we did. My wife travels for work, and that actually helps me stay focused on the law.

I have a couple of very close friends who are lawyers. They have both been getting on me to go to law school for years. Now that I’m here, I think their instincts were right. I really enjoy the law.

That’s what you need to figure out. Whether you are going to enjoy it. And I’m not sure that’s possible without going through the motions. I don’t think there is anything you can read that will even begin to prepare you for law school or give you any idea what you’re about to face. I read everything I could find the year before 1L and very little of it was worthwhile. “Law School Confidential” was pretty good.

Your family and your military experience would be assets in law school… if not for you at least for the others in your class. If you go, you’ll realize how refreshing comments from people who have experienced more than undergrad can be.

Part timers are an interesting crowd. The admission’s bar is a little lower for PT’s at USD. More than a few people take advantage of that and apply to the PT program even though they have no intention of working. That means you will be going up against people who aren’t distracted by a job. 1L classes have a strict curve, in a class of 80 there are at most 8 A’s available. You sound pretty sharp, but you should know what you are facing. After the first year, many of the desired electives are taught in the evening only, so FT’s and PT’s are on the same footing. That’s little consolation if you are trying to get a big firm job because that competition is essentially over after your first year. If you aren’t at least top 20% after 1L, you’re effectively out of the race.

If you decide to go, buy the LEEWS Essay course. PRICELESS! Listen to the course, do the exercises. Practice early… as soon as you finish a topic in each class. Make up your own hypos and write practice answers. This is what matters. You’ll never be graded on your briefing skills… just on the essays. Learn how to apply the law to facts and organize your analysis. It’s the only thing you’ll ever be graded on. I didn’t find this until this year. In 1L I was top third, last semester I aced my exams. I credit LEEWS and early/often exam practice. OK, end of the commercial.

Waiting is a great idea. It sounds like your wife is holding off working until the kids get older? This advice probably won’t help you but I will share it anyway. My wife was concerned about me giving up my job to go to school. We took two years to “practice.” During that time, we lived on her income and banked mine. In the process we learned that we could live on her salary and we saved enough money to pay cash for tuition. While this might not work for you, think of other ways that you can minimize the stress of giving up your income. Full time for free sure sounds like a great start.

Good luck. Thanks for serving. Congratulations on living within your means and saving responsibly!

[Chance the Gardener]

Juice –

Is there a law school at the large university in this small Midwestern town? If so, how does it rank against USD? USD is in the 50’s last time I checked… so anything +/- 15 from that is likely equivalent. What was your LSAT score? You mentioned a MSEE, do you have a BSEE? Have you considered IP law? I promise my next post will have some actual advice, I just need to know more. I’m a 39 y/o 2L at Santa Clara with a BSEE and former military experience…

[Chance the Gardener]

I also have an aversion to debt. I pay cash for cars… and I try to buy ones I can keep for 7 years. I pay off my credit cards every month. And I take the money I save on interest and put it toward retirement. I’m sitting on a healthy bundle of cash, yet when it comes time to buy a place I probably won’t use all of it on the down-payment.

I like the security of having liquid assets. It makes me feel like my wife and I work each day at our own whim. If either of us feels compelled to quit on principle, we’ve got cash to cover us until we find something else. Saving for retirement helps me to remember that I won’t always have to work. There’s a future out there where every day feels like Saturday.

If I could get in the Delorian an go back to 29 y/o, I would have saved more. These are just my ideals. Don’t think of that 130k in retirement savings in today’s terms… think of it in terms of what it will be worth when you are sick of working. Don’t bet that your house will pay for your retirement. It’s hard to spin downsizing as anything but depressing. If you’re worried about a stock market downturn, then put your money where you think the boomers are going. They certainly aren’t going to be buying $300k starter homes.

For what it is worth, here’s my advice. When its the right time to buy, put down as much cash as you have on hand while maintaining a liquid amount to make up for a year’s income. Finance the rest with a fixed 15 year mortgage… you can burn that mortgage on your 45th b-day! Keep contributing as much as you possibly can to your 401k. Live within your means and teach everyone around you how rewarding that can be. You’ll know the the time is right when prices fall and interest is such that you can comfortably make the payment on that mortgage out of 30% of your take home pay. Your take home pay will of course be lessened by your $15k/yr contributions to retirement.

You are way ahead of most people your age by even thinking critically about this stuff. Congratulations.

[Chance the Gardener]

jztz’s formula is on spot… If you forget about depreciation and only consider the average monthly mortgage interest over the comparison period in the ‘Cost of Ownership’ calculation, you’ll get a flat-market number for comparison purposes. And to be even more buy-bullish, you could multiply the monthly rent by a factor to approximate the average effect of a 10% per year rent increase (1.34 for a 3-year window) [(1.1^number of years/number of years)+ 1]. Once you have a spread sheet set up, start looking at places to buy that could reasonably replace the house you’re in. Plug in the purchase price, the HOA and the amount of your down payment. For me, I can’t find a place that even comes close to Cost of Ownership being less than Cost of Rental. How does this get any better if I have to add depreciation to the Cost of Ownership? How can the rate of depreciation (slow or fast) make any difference. If I rent and continue to invest my rent over ownership dollars in a CD (5.4% at Countrywide), it should compensate for even a mild rate of INFLATION. Even if it comes out that buying is slightly better, consider all of the risks of ownership… repairs, special assessments, etc. Given today’s prices, I can’t understand why anyone would buy for financial reasons. The difference in cost is the cost of your non-financial justifications. If pride in ownership is worth it, then go for it. Just know how much you are paying for it!

[Chance the Gardener]

Raybyrnes… I’m actually a 2nd year law student who will be 40 y/o before I take the bar. I have a BSEE and have worked in commercial construction for over 10 years. I think very highly of an education. What I don’t think highly of is students who decide to go to college and grad school who have never even done the economic analysis — who haven’t even done the personal assessment of attitude and aptitude that would allow them to know whether they could make it pay off. For three years, my wife and I lived on her income alone, saving mine for law school. Now, I’m paying cash. When its all over, I’ll have enough cash to hang my own shingle if I want. In the meantime, my wife and I have learned to live well within our means. We pay cash for cars that we keep for ten years… all the while saving money for their replacement. We sold our house in August of 2005 and realized nearly a 500% profit on our down payment. We’ve rented ever since. We’ll probably use the proceeds of that sale to buy a condo downtown once I’m out of school and turning a profit. Whatever we buy we’ll probably live in for a long time. I’m not waiting because I’m trying to find the bottom, I’m waiting b/c I can rent for what I make on the interest I earn on a CD funded with the house sale proceeds. Paying cash is never foolish, its only a reflection of your personal risk tolerance. I know that I’m fortunate… I know not everyone can do what I’m doing. But parents can certainly teach their kids the value of living within your means by not leveraging their own households to send them off to college.

If a college bound student doesn’t recognize the concepts of opportunity cost and living within his means it won’t matter that his income is greater than if he didn’t go to college. And, they don’t teach that at Berkley!

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