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patientrenter
Participant[quote=Allan from Fallbrook]…House in the Hamptons, new Maserati, $2,000/hr escorts, cocaine, Cristal champagne and that custom made French yacht. Why be responsible to your clients when all those toys beckon?[/quote]
Lol! What incentive problem? Oh, yeah. I’m sorry, I got lost in the daydream painted by your words. Was I complaining about that? It’s disgusting. BTW, if I were on the dark side, where could I sign up? I’m doing a paper on it…
Participant[quote=Allan from Fallbrook]…House in the Hamptons, new Maserati, $2,000/hr escorts, cocaine, Cristal champagne and that custom made French yacht. Why be responsible to your clients when all those toys beckon?[/quote]
Lol! What incentive problem? Oh, yeah. I’m sorry, I got lost in the daydream painted by your words. Was I complaining about that? It’s disgusting. BTW, if I were on the dark side, where could I sign up? I’m doing a paper on it…
Participant[quote=Allan from Fallbrook]…House in the Hamptons, new Maserati, $2,000/hr escorts, cocaine, Cristal champagne and that custom made French yacht. Why be responsible to your clients when all those toys beckon?[/quote]
Lol! What incentive problem? Oh, yeah. I’m sorry, I got lost in the daydream painted by your words. Was I complaining about that? It’s disgusting. BTW, if I were on the dark side, where could I sign up? I’m doing a paper on it…
ParticipantThis is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.
For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.
Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.
I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:
1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices
or
2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.
That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
ParticipantThis is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.
For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.
Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.
I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:
1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices
or
2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.
That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
ParticipantThis is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.
For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.
Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.
I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:
1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices
or
2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.
That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
ParticipantThis is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.
For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.
Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.
I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:
1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices
or
2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.
That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
ParticipantThis is a fascinating thread. In figuring how much to spend on a home, some people judge how much they could afford to lose on selling it (versus the purchase price), assuming they just had to kiss goodbye to that money forever. Then they assume that this maximum tolerable loss is some conservative % of the price, and that gives the maximum affordable price.
For example, let’s suppose I think I could handle losing as much as $100,000 on my home purchase (ignoring for a moment the maintenance costs and property taxes and mortgage interest etc). I then assume that the maximum loss on a house is 30%. That means I can afford a house up to $333K.
Others assume that houses go up forever, with any setback being temporary. So there is no real net cost, except for those monthly expenses. They then just calculate the most they can afford to spend on a monthly basis, and translate that into a purchase price. They don’t set aside any serious amount for the possibility of a capital loss. They are so confident that they can time the market, or that the market is so strong over long periods, that they don’t budget for a possible significant capital loss.
I’d say that the latter psychology is what has slowly taken root since WW2, and is now thoroughly embedded in the minds of 90% of Americans. Which RE buyer doesn’t believe either that:
1. RE goes up forever, and it’s just the poor dumb OTHER guy who may have to sell in a temporary future dip in prices
or
2. RE may go up and down, but they can time the market better than the poor OTHER guy who pays more than they will ultimately sell it for.
That, plus all the financial shenanigans politicians had to engage in to sustain this blind belief beyond its due-by date, is what has us in this fix now. I hope Piggs start to assume that if they “pay” $1 million for a home, they may end up actually paying some decent fraction of that $1 million (in spite of us all being market timing geniuses), maybe as much as $200-400K, and they really think through whether they would be comfortable with that. If not, then think about a lower price.
ParticipantDo we agree that only government can change the agent – principal problem? And that agents have the upper hand in lobbying our govt reps?
I don’t see how this can change. The general public howls for foreclosure forebearance, but barely recognizes the agent principal problem. I am usually optimistic, but here I wonder if we’ve crossed the point of no return. Our pols are pretty much captive to these agents. If this is the case, then there will be ever larger amounts of ‘stupid’ money that’s taken advantage of. I don’t like it, but as Authers points out, it does open opportunities to those who choose to take advantage.
ParticipantDo we agree that only government can change the agent – principal problem? And that agents have the upper hand in lobbying our govt reps?
I don’t see how this can change. The general public howls for foreclosure forebearance, but barely recognizes the agent principal problem. I am usually optimistic, but here I wonder if we’ve crossed the point of no return. Our pols are pretty much captive to these agents. If this is the case, then there will be ever larger amounts of ‘stupid’ money that’s taken advantage of. I don’t like it, but as Authers points out, it does open opportunities to those who choose to take advantage.
ParticipantDo we agree that only government can change the agent – principal problem? And that agents have the upper hand in lobbying our govt reps?
I don’t see how this can change. The general public howls for foreclosure forebearance, but barely recognizes the agent principal problem. I am usually optimistic, but here I wonder if we’ve crossed the point of no return. Our pols are pretty much captive to these agents. If this is the case, then there will be ever larger amounts of ‘stupid’ money that’s taken advantage of. I don’t like it, but as Authers points out, it does open opportunities to those who choose to take advantage.
ParticipantDo we agree that only government can change the agent – principal problem? And that agents have the upper hand in lobbying our govt reps?
I don’t see how this can change. The general public howls for foreclosure forebearance, but barely recognizes the agent principal problem. I am usually optimistic, but here I wonder if we’ve crossed the point of no return. Our pols are pretty much captive to these agents. If this is the case, then there will be ever larger amounts of ‘stupid’ money that’s taken advantage of. I don’t like it, but as Authers points out, it does open opportunities to those who choose to take advantage.
ParticipantDo we agree that only government can change the agent – principal problem? And that agents have the upper hand in lobbying our govt reps?
I don’t see how this can change. The general public howls for foreclosure forebearance, but barely recognizes the agent principal problem. I am usually optimistic, but here I wonder if we’ve crossed the point of no return. Our pols are pretty much captive to these agents. If this is the case, then there will be ever larger amounts of ‘stupid’ money that’s taken advantage of. I don’t like it, but as Authers points out, it does open opportunities to those who choose to take advantage.
ParticipantFair enough, dave, and I would be thrilled if the incentives were changed in an effective way. But at this point, I’d rather just get the agents out of the way. I’d recommend that as a first choice, and if that cannot be made to work then work on the agent incentives. I’ve seen (and I’m sure you have too) endlessly clever schemes cooked up by agents to compensate themselves regardless of the real long term outcomes for the principals. It’s easier to set up your farm away from the swamp than in it.
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