We received an offer in the mail recently to buy "Dockable Lakefronts" with a "New 2,500 sq. ft. Log Home Package!*" You no doubt noticed the asterisk right away. Oh, it was a "One Day Only Sale!" and it is "convenient" to where we live. Just minutes from the I-57 and I-24 interchange.
Interestingly, they don't give specific directions on how to get there. You call an 800 number first. I guess they want to check you out before you check them out.
Now to the asterisk. In very small print at the bottom of the page it indicates: "Log Home Package consists of land and building materials. Construction is buyers responsibility. Log home will differ from home shown. Some restrictions apply."
I was disappointed I apparently was not getting a brand new, beautiful 2,500 sq. ft. home on a dockable lake lot for only $49,900. Life just isn't fair.
There are paved roads and underground utilities including water, so that's good, but what extra expenses could possibly be added to this dream purchase? What does it cost to put a 2,500 sq. ft. log home "kit" together? And does it include plumbing? Heating & air conditioning? Appliances? Furniture? (Probably not) So, what is your guess the final cost of this convenient weekend getaway would be? As long as we're at it, let's figure in taxes, utilities and maintenance. Oh, did I mention it seems to be located about 162 miles from where we live?
I did a search on the Internet which indicates for some log homes the rough final cost is $150 to $200 per sq. ft. If you take 2,500 x $150 that would be $375,000. I'm not sure how the land figures into that and you could do some of the assembly work yourself or maybe just the interior. But a fairly reasonable wild guess would put the cost of this project at around $200,000 to $250,000. That's a far cry from "$49,000!" (Their exclamation point, not mine)
I'm not saying you should never buy a nice second home conveniently located to wherever you live. What I am saying is, do the math. Ask all the questions and get good answers. Then figure out how much more than the advertised price you're actually going to pay.
Oh, I forgot to add in the cost of having a dock built and buying a boat to use. It's so easy to overlook certain minor points when you're chasing a hot bargain. Did I also forget the insurance on the house, the dock and the boat? Boy, these things sure add up.
And another thing, if someone has already gone to all the expense of having one of these log homes built but they want to sell (maybe they forgot to add up all the expenses and can't afford it?) then you may have an opportunity to buy it at a better price. These things do happen.
If you've never moved into a newly construction home, visit with someone who has. They can probably tell you interesting stories about the additional expenses they had not anticipated.
Did I mention this area is probably "unprotected" for fire department services which means the insurance would generally be much more expensive? I wonder if the driveway off the road would need to be paved?
Again, I'm not saying never buy something like this, just make sure you do the math first.
Supplemental I: We recently received another "One Day Only" offer from this same operation for "Phase II". If I'm reading the promo correctly, the dockable lakefronts now start at only $39,900. (I guess waiting a few months for Phase II makes the 20% price drop worthwhile) But wait, there is now a special offer of a "Lakefront Estate & A New 2,500 Sq. Ft. Log Home Package!* (See note on asterisk above) Only $79,900." The $49,900 log home in the original ad is no longer listed separately. And, since there is probably a difference between a "Lakefront Estate" and a "Dockable Lakefront" it's hard to break the price down for a true comparison. But, this is Phase II so obviously things are selling.
Supplemental II: Another One Day Only offer arrived for Beautiful Wooded Estates with Direct Lake Access From Only $9,900! It seems amazing to me that an "Estate" can be purchased for so little money but that's what obviously makes it a bargain. They are offering 100% financing too. Oh, and "Unlimited Outdoor Activities" which is undefined but it does conjure up an exciting image in my mind.
Supplemental III: Another offer arrived indicating they are holding a Liquidation Sale on 8/27/11. Again they have 100% financing available. Prices "From Only $24,900! Comparable Lakefronts have Sold For Up to $130,000" (Sure glad we waited for the bargain pricing.) This is "Bank Ordered Pricing" whatever that is. They also quote CNN Money, July 2011,"A bright spot for bargain hunters: REAL ESTATE... making now a compelling time to acquire a second address." And SmartMoney, January 2011, "Smart people are buying REAL ESTATE." (For some reason I don't think SmartMoney capitalized real estate, but it works better for their advertising literature.) Again, no specific location information. You call and they'll let you know where they are.
Wednesday, April 28, 2010
Friday, April 2, 2010
Your Credit Score
Your credit score has become a very, very important number. It determines whether you’ll get a loan, the interest rate you’ll pay (the lower your score the more you’ll pay), how much you are charged for certain insurance policies and sometimes whether you get a job or not.
I mentioned in a prior post that Warren Buffett’s credit score was 718. This was due to 23 missed payments on a $294 loan. Turns out there were erroneous entries on his credit report. (I happen to know Buffett would never borrow more than $100) If he can have errors on his credit report, you can too.
It is critical that you keep track of this number. Complete books have been written on this subject and I recommend Your Credit Score, Your Money & What's at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future by Liz Pulliam Weston.
Your credit “report" and your credit “score” are two separate things:
1. Your credit report contains information on the various credit card accounts, car loans and home mortgages you have and the balances and payment history of each account.
2. Companies then analyze that information and use it to create your credit score. Several companies do this and they will each have a different number and “range” (showing how good or bad your score is.) FICO is generally recognized as the most prominent credit scoring company.
There have been sites on the Internet which offer to provide you with a “free” credit report, but many of those sites required you to start a subscription service which you end up paying for.
The legitimate Web site I’m familiar with is www.AnnualCreditReport.com where you can order your totally free (with no strings attached) credit reports. You can order them all at once or stagger them at 4 month intervals so you’ll have an ongoing way to see the activity on your report. However, not every business reports to all three of the credit agencies so there may be some information on one which is not on the other.
Some credit report companies that end up charging for reports have paid to have their information listed on certain internet search sites so they will show up when a search is done for “free credit report.” Just be aware.
Ben Stein is a noted multipurpose talent who has written several financial books. He may be better known as the economics teacher in the movie Ferris Bueller's Day Off. He has been on an ad promoting a free (FreeScore.com) credit score service. The actual name, which includes “Free,” would seem to imply you can get a free credit score at this site but it appears you need to give them a credit card number and accept a $1 charge on your card. After seven days of “free trial” you’ll be a member at $29.95 a month. I’m sure this is all very legit and aboveboard and with Ben Stein endorsing it I’m sure he checked it out to make sure his fans would not be taken advantage of, but you won’t know a lot of this stuff before you sign up. I checked the FAQs and it doesn’t ever seem to lay out the exact process involved.
The function of marketing is to reel you in so a sale can be made. There is nothing inherently wrong with this process. It’s basic free enterprise. It gets a little dicey though when you get right to the point of purchase and THEN the full details are disclosed. Of course, it’s even worse if the details are not actually ever disclosed.
Borrowing sensibly and making every single payment by its due date will go a long way toward keeping your credit score in the higher range. Interestingly, when you do this your interest rates will generally be lower which makes it easier to make the payments. Conversely, if you skip payments your interest rate will probably increase which makes it even harder to make your payments. Either way, it can be a self-fulfilling prophecy.
There are a lot of errors on credit reports. One source indicates 25% have errors and a government site reports up to 70% may have errors. Whatever the number is, it just makes good sense to check your information regularly to see that it is error free. It’s usually easier to dispute errors from the last year than it is to work on something from five years ago. Also, if someone has your credit information and is creating accounts or stealing your identity, the sooner you find out about it the better.
Supplemental: The recent CARD Act of 2009 put the kibosh on many of the practices used by companies to entice people to sign up for free credit reports and scores and then begin charging them. To avoid the process of weeding through various offers and conditions, just stick with www.AnnualCreditReport.com
I mentioned in a prior post that Warren Buffett’s credit score was 718. This was due to 23 missed payments on a $294 loan. Turns out there were erroneous entries on his credit report. (I happen to know Buffett would never borrow more than $100) If he can have errors on his credit report, you can too.
It is critical that you keep track of this number. Complete books have been written on this subject and I recommend Your Credit Score, Your Money & What's at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future by Liz Pulliam Weston.
Your credit “report" and your credit “score” are two separate things:
1. Your credit report contains information on the various credit card accounts, car loans and home mortgages you have and the balances and payment history of each account.
2. Companies then analyze that information and use it to create your credit score. Several companies do this and they will each have a different number and “range” (showing how good or bad your score is.) FICO is generally recognized as the most prominent credit scoring company.
There have been sites on the Internet which offer to provide you with a “free” credit report, but many of those sites required you to start a subscription service which you end up paying for.
The legitimate Web site I’m familiar with is www.AnnualCreditReport.com where you can order your totally free (with no strings attached) credit reports. You can order them all at once or stagger them at 4 month intervals so you’ll have an ongoing way to see the activity on your report. However, not every business reports to all three of the credit agencies so there may be some information on one which is not on the other.
Some credit report companies that end up charging for reports have paid to have their information listed on certain internet search sites so they will show up when a search is done for “free credit report.” Just be aware.
Ben Stein is a noted multipurpose talent who has written several financial books. He may be better known as the economics teacher in the movie Ferris Bueller's Day Off. He has been on an ad promoting a free (FreeScore.com) credit score service. The actual name, which includes “Free,” would seem to imply you can get a free credit score at this site but it appears you need to give them a credit card number and accept a $1 charge on your card. After seven days of “free trial” you’ll be a member at $29.95 a month. I’m sure this is all very legit and aboveboard and with Ben Stein endorsing it I’m sure he checked it out to make sure his fans would not be taken advantage of, but you won’t know a lot of this stuff before you sign up. I checked the FAQs and it doesn’t ever seem to lay out the exact process involved.
The function of marketing is to reel you in so a sale can be made. There is nothing inherently wrong with this process. It’s basic free enterprise. It gets a little dicey though when you get right to the point of purchase and THEN the full details are disclosed. Of course, it’s even worse if the details are not actually ever disclosed.
Borrowing sensibly and making every single payment by its due date will go a long way toward keeping your credit score in the higher range. Interestingly, when you do this your interest rates will generally be lower which makes it easier to make the payments. Conversely, if you skip payments your interest rate will probably increase which makes it even harder to make your payments. Either way, it can be a self-fulfilling prophecy.
There are a lot of errors on credit reports. One source indicates 25% have errors and a government site reports up to 70% may have errors. Whatever the number is, it just makes good sense to check your information regularly to see that it is error free. It’s usually easier to dispute errors from the last year than it is to work on something from five years ago. Also, if someone has your credit information and is creating accounts or stealing your identity, the sooner you find out about it the better.
Supplemental: The recent CARD Act of 2009 put the kibosh on many of the practices used by companies to entice people to sign up for free credit reports and scores and then begin charging them. To avoid the process of weeding through various offers and conditions, just stick with www.AnnualCreditReport.com
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