"Non-Buyer's Remorse"

Coaching 1st-Time Buyers

Everyone knows what Buyer's remorse is: the feeling you get, after you've bought something, that you just made a horrible mistake.

So, what is non-Buyer's remorse?

The feeling you get when you find out that the house you were furiously deliberating about buying, instead sold to someone else.

I counsel first-time Buyers weighing a purchase decision to imagine how they'd take such news.

If they think their reaction would be indifference (or similar) . . . it's not the right house.

(I suppose the appropriate name for that sentiment would be "non-Buyer's non-remorse").

P.S.: Buyers should trust their gut on this one only if they already have done their homework and know the market.

And, this test doesn't apply to investors.

P.P.S.: It's been awhile, but my advice to Buyers in multiple offers is similar: 'the right price to offer is the price you can live with if you get the house . . . . and the price you can live with if you don't.'

"Guaranteed" Pre-Approval Letters

Porous Guaranty; or, "But, Can You Take it to the Bank?"

I feel the same way about "guaranteed" Pre-Approval Letters that I do about "guaranteed" pizza delivery or promises of "on-time" service calls by my cable company:

a) Officially dubious; and

b) Reminded of the reason companies (often) need to offer such promises in the first place, i.e., reputations for lacklustre and/or tardy service.

Standing Out From the Crowd

Which isn't to say that I don't understand what the lender is trying to accomplish.

Standard Pre-Approval Letters are widely understood to signify practically nothing.

In theory, they tell a Seller that the Buyer can afford to buy their home.

In practice, they commit the issuing lender to nothing, and are dispensed after obtaining the most basic information from the would-be borrower/home buyer.

Solving the Wrong Problem(s)

By contrast, as marketed by at least one local lender, a "Guaranteed Approval" loudly promises to pay the Seller an eye-catching amount -- $10,000 seems to be most common -- if the Lender fails to close the Buyer's loan.

The underlying message is clear: 'unlike the perfunctory financial screening performed by other lenders, we carefully qualify our Buyers.'

There are just two catches:

One. All the conditions -- in fine print, naturally -- that invalidate the guaranty, including "if the property is deemed to be in a declining market or if the investor guidelines change prior to closing"; and

Two. The Buyer's financial wherewithal (or lack thereof) isn't what's causing deals to tank these days.

Rather, the biggest obstacles to deals now seem to be unrealistic offering (and asking) prices, followed by low appraisals.

In the first case, the Buyer and Seller never come to agreement on price.

In the second case, the Guaranteed Approval is moot, because the terms contained in the standard Financing Contingency allow the Buyer to walk.

Ultimately, the best way to regard a Guaranteed Approval is like chicken soup: 'can't hurt, might help.'

Fixing Wall Street: "So, What Do You Do NOW?"

Looking for the New Volcker's

Regular readers of this blog know that I could hardly be a harsher critic of modern-day Wall Street: its practices; its obscene pay for little or no economic contribution ("Wall Street is Worthless"); and its corrupting influence on our government and society generally.

And I've got plenty of company.

As the fog lifts on the cause(s) of The Crash of '08, more and more people -- dare I say a consensus -- now share that viewpoint.

But as the "Wall Street-as-culprit" narrative gains traction, it logically begs the (entirely fair) question: "So, what do you do now?"

Next Steps

My answer is to go back to the airplane metaphor in "Wall Street's Uncontained Failure."

When trying to save a hijacked plane, however badly disabled, the first order of business is always to . . . replace the pilots.

Only once that's done, do you turn your attention to the altimeter, air speed, flap settings, etc.

And only once the plane has been stabilized do you turn your attention to longer term tasks like redesigning the defective engine(s) that just exploded.

Volcker 2.0

So, my starting point would be to look for the next Paul Volcker -- ideally, lots of them.

That is, people who are very bright (but by no means brilliant), honest, public-spirited, etc.

Plus two more things: 1) they're not tied to Wall Street ("Bye, bye, Tim Geithner, et al"); and 2) they're financially sophisticated -- but not too.

Fidelity Magellan guru Peter Lynch famously advised investors to put their money in businesses that "any idiot can run -- because sooner or later, any idiot is probably going to run them."

The next generation of Paul Volcker's will intuitively understand the government equivalent, and oversee financial reforms simple enough that they can be implemented and enforced without Wall Street "expertise."

And exactly who will find and appoint these new, enlightened financial stewards?

Try, elected officials whose campaign money didn't come from Wall Street.

P.S.: One more example of how some problems don't yield to direct solutions, especially when they're symptoms of a bigger problem: my notoriously unreliable garage overhead light -- a real headache when it gets dark before 5 p.m., as it does in Minnesota this time of year.

Over the last few years, I have experimented with every type of bulb there is, including "industrial" bulbs that have more durable filaments.

Result? A little extra use, perhaps, but no long term solution.

Then, this Fall, my garage door opener finally breathed its last, and needed replacing.

The new one is whisper-quiet and vibration-free -- and doesn't eat light bulbs.

Dividends & Blog Hits

Do you know the only thing to give me pleasure? It's to see my dividends coming in.

--John D. Rockefeller

Trust me, I have very little in common with John D. Rockefeller, starting with my balance sheet.

And blog hits don't pay the bills -- commission checks do.

But I confess, substitute "blog hits" for "dividends" and I relate -- just a little -- to Rockefeller's quote (above).

That's especially true for overnight hits (Central Standard Time) from literally around the world, in every time zone.

I don't necessarily agree with Thomas Friedman's line about the "world being flat" (again) . . . but it sure is wired.