Naked Offers, Jumping off Cliffs, and Life’s Surprises

April 30th, 2018 by Potato

I’ve long lamented the use of so-called “clean” offers common in GTA bidding wars, where people bid massive amounts on a property with no conditions to protect themselves. It felt like the boy who cried wolf — for so long I’ve been warning people not to do that because in in the unlikely event something goes wrong, it can blow up very badly — damages in the hundreds of thousands can break a regular family’s finances. Yet for so long the market just kept going up and lending just kept staying loose and people ignored that advice.

Of course, at the end of the story there really is a wolf. And as the white-hot spring 2017 market cooled a bit, we got a few deals that couldn’t close and some court cases making the news. There’s a Reddit thread with hundreds of comments on this story, and at a quick glance most of them seem to be about the fact that there was no financing condition.

“But all the other offers are without conditions.”

Look, this is as close as you can possibly come to that cliche mom advice: if everyone else jumped off a cliff, would you do it too? If you actually need financing to close the deal, then you need a financing clause. If a rich person who doesn’t need financing or a foolish moister with a realtor whispering in their ear is bidding against you with a naked offer, then accept defeat (and subsequent teasing about being a forever-renter basement-dweller) gracefully, rather than jumping off the cliff with the rest of the lemmings.

I can understand that realtors are in a conflicted position, and are more interested in closing a deal than protecting their clients, so they collectively pushed the herd to this madness of unprotected naked offers becoming the standard, something you “had” to do when making an offer. But hopefully people will heed the warning of the judge in this case and stop that nonsense (though a cooling market may stop it naturally as bidding wars die down and people go back to negotiations with one prospect at a time). A part of me hopes the would-be buyers sue their realtor for pushing them to put in a naked offer when the deal was truly contingent on financing, but I suspect in reality it’s more likely the realtor will sue them for the commission lost when the deal fell apart, adding insult to injury.

And as long as I’m ranting and reminding people that there is risk in real estate: financing of a preconstruction is not guaranteed. If you’re not rich enough to have a substantial cushion to close even if the market value at completion is a fair bit below the price you contracted for (which you still have to pay), you’re not rich enough to play in pre-con.

I haven’t really blogged much about the real estate market: the core rent-vs-buy lesson hasn’t changed, and there isn’t much that happens in real-time to talk about. The 30% year-over-year gains of Spring 2017 have cooled, which not many were surprised at, and it will take years to see how it plays out from here. However, while I know that life is hard (very, very hard) to predict and forecast, there are a number of things that have surprised me:

    1. How fast the turn was, especially in parts of the 905. The market was totally coked-up-banana-pants-insane last spring. Then it wasn’t, and prices started to drop. The Stouffville case at the top of the post is an extreme example, but 10-20% decline in under a year is unheard of. For years when people tried to brush off the US housing bubble experience, one of my main points was that the subprime crisis was mostly an accelerant — even without subprime, we were still vulnerable to a crash, but that it would just happen slower. Instead, Markham is on track to out-crash Pheonix, Miami, and Vegas. Surprise! (Though this one comes with a bit of an asterisk as there was a government intervention in the form of the foreign buyer’s tax).

    2. That condos are holding up while detached prices tank. This one can likely be blamed partly on AirBnB, partly on people buying what they can afford after being priced out of detached houses in the frenzy. But that’s a complete surprise from what many who joked about Toronto’s official bird would have expected to see when the market started to turn.

    3. How many AirBnB units there are. I mean, Toronto wasn’t exactly lacking in hotel space for tourists from what I know. And the model of renting out a condo as a luxury hotel was, by all reports I’ve seen, a rather famous flop at the buildings designed for it (esp. Trump). Yet there are thousands of units in the city, despite being of questionable legality even before additional rules came out.

I’m sure there will be lots more surprises in the years to come.

DIY Root Canal vs DIY Tax Stuff

March 19th, 2018 by Potato

Jason Heath pulled out a version of a quote I hate in this Ask MoneySense article on OAS clawbacks:

“Few people would think to Google how to perform a root canal, let alone try it themselves. But lots of people try DIY tax and financial advice.”

Now, it’s hyperbole, and I’m going to rant about it, but I don’t disagree with the main thrust of the article or the next part of that quote: “If you don’t have an accountant, contact one and buy an hour of their time. Bring a list of questions or send them beforehand, so you can get an income tax “check-up.” It may be well worth it even if you only do it once in your life or at least once in a while…” The last half of that paragraph, getting a check-up to have some common questions answered, is entirely reasonable and a good suggestion.

There is definitely a place for professional advice — both planners and accountants. But there’s also a place for DIY-ing things.

The tired root canal analogy makes it sound like you have to be crazy to approach your taxes on your own. But just like with dentistry or medicine, there are lots of things that are totally reasonable to DIY (or Google-then-DIY). You would not go to your dentist every time you had to brush your teeth or floss, and you shouldn’t clog up your doctor’s office with every minor cold or papercut you get, even if you would go for a root canal or surgery. If you have a canker sore it’s totally reasonable to hit Google and gargle some warm salt water. Not everything is a root canal, not everything needs a professional to manage. And especially when it comes to taxes, there are too many people in the world who shrug and say “get an accountant” rather than helping people learn to DIY (which may be related to regulations and the fear of being sued).

This particular article also really highlights an important aspect of the issue: when we’re talking about mouths, people generally have enough background information to know what is at the totally-DIY-able level (like daily brushing) and what is at the I-need-a-professional level (like fixing a cavity or getting a root canal). When it comes to finances, lots of people don’t have the basic literacy to find the answers they need or use them appropriately. Here, finding the OAS clawback threshold is pretty easy, and planning around that is a decent edge case where it’s not unreasonable to do some DIY around it, but also not exploitative to suggest it’s worth getting a professional’s input. However, the person asking the question doesn’t seem to know that the threshold is about clawbacks, not reporting — you have to report everything. So they couldn’t find the answer because they didn’t know how to ask the question (or interpret the answers they likely did turn up). There’s some essential background knowledge missing that’s going to make DIY a challenge here — indeed, to know what can be done on your own.

What then is the answer? I really don’t like a blanket “this is like a root canal and you shouldn’t do it yourself” type approach — as someone who makes tools to help people DIY stuff, that is anathema. People shouldn’t be dependent on professionals; DIYing many things shouldn’t be construed as an impossible, whack-a-doodle notion. But at the same time, there is a financial literacy gap that makes it easy to point out the challenges in implementing DIY approaches. And people shouldn’t be afraid to get some help and pay appropriately.

“Adulting” help is becoming more important and more available. Indeed, the suggestion Jason makes after the hyperbole that I took so much issue with is good — I really like the suggestion to get a few hours of a pro’s time to get questions answered well. Not “get an accountant to manage all your money stuff because you’re hopeless” but “get a block of time and ask some questions to figure this out properly.”

Of course, the analogy to medicine or dentistry really breaks down in personal finance, because our own gaps in knowledge and ability vary. It’s not as clear-cut as this thing is only for professionals, while you’re out of luck if you need help with this basic everyday thing. Especially as paying by the hour for advice is a model that’s becoming more available: no longer is it that investing is the thing you need a pro for, in part because selling an investing product is the only way for them to get paid. Now money coaches and people like Chris are there to help with things like understanding your money and building a budget, while rarefied applications like investing are completely accessible to DIY-ers.

New $10 Bill

March 8th, 2018 by Potato

The new $10 bill was just announced, and it’s vertical. I’m getting dizzy just looking at it, and my wallet OCD doesn’t know what to do. This doesn’t fit with the design of any of the other bills (will we be getting new $5/20/50 bills soon to match?), and it’s a problem. I am exactly the sort of person (to no one’s surprise) who always puts my bills in my wallet facing the same direction, in ascending order. When I worked at the theatre, my till was similarly rigid. Having a bill that doesn’t face the right way is going to be uncomfortable.

Some people are pointing out that while wallets universally hold bills horizontally, tills hold bills vertically, so this may make some sense to someone.

To that I say, ok, you have a point, but we didn’t have to screw up the whole bill, we could have part of the bill satisfy each method — see illustration below. And I don’t really care that much about which way the art and design elements face — a top-right number for the value aligned for horizontal placement would fit with other bills (or top left for the back side), and then the bottom of the vertical layout could have a vertically oriented number for better use in those settings (particularly tills).

A quick mockup of a $10 bill with denomination numbers for both horizontal and vertical orientation.

Insurance Woes

November 17th, 2016 by Potato

This post was drafted a while ago, when Wayfare was trying to get insurance in the spring. I was sitting on it partly because I was waiting for her to try another avenue (or just again with another year of stable post-mat-leave income) to get disability insurance and have a happier outcome. With recent events, it seems like just an extra kick in the pants.

“Insure all the things!” Wayfare was exclaiming after her two-hour meeting with the insurance saleslady. Considering she had gone in on a surgical strike mission to acquire some disability insurance, and came back loaded with pamphlets on all manner of insurance products yet lacking a quote on disability insurance, I have to commend the saleslady’s skill.

I have a very stoic view of insurance: if there’s a chance that some event will ruin us, we need to try to insure against it (and take reasonable precautions to prevent it from happening in the first place — note that in reconciling my philosophy and my actions, diet and exercise are not classified as reasonable precautions). Insurance is not something to buy to get a windfall in case of tragedy, and so we aim to self-insure wherever we can.

It’s also important to understand that we are in no way normal parents of a young child. Financially speaking, losing one parent or the other will not ruin us. We both have advanced degrees, we both work, and we have financial resources sufficient to cover over a year of cash burn if we had to take a prolonged leave of absence — plus as renters, we have the flexibility to reduce that cash burn with just a few months’ notice1. We are, as Miss Sunlife put it, “like a family of happy little squirrels, burying [our] nuts all over the yard in anticipation of winter.”

So my main fear is prolonged disability — because living our current extravagant lifestyle of having grass on both sides of our house (a detached house!) in Toronto requires two incomes, and one of us becoming disabled doesn’t free up the other to move on and move out in the tidy (if morbid) way that death would. Thus, disability was the one kind of insurance I did want to pay for, and we finally got off our butts to get a quote and make that happen.

But Wayfare came back full of weepy scenarios that appealed to emotion. What if something happened to little Blueberry? What would we do? Wouldn’t we want to be able to take some time off work to care for her or grieve? Yes — but doing so would not ruin us. We would survive and so we don’t need to insure against such a low-probability event. And if she died, I would not expect to long survive her.

“What if she got some childhood illness and then couldn’t get insurance of her own when she was an adult? If we get insurance on her now, then she can be automatically insured when she’s older and won’t have to go through this process.” Insuring the ability to get insurance is taking things too far for me. That’s second-order insurance. The fact that Miss Sunlife was able to make this argument stick firmly enough in Wayfare’s head for her to try to enthusiastically convince me of the need to insure our daughter demonstrates her level 8 insurance warlock sales skills. There were also pitches for critical illness insurance (which, reading the materials in hindsight, would not have covered this particular critical illness) and life insurance for us.

This crazy process started from a trip to the insurance saleslady looking for disability insurance for Wayfare, a self-employed person. She did not come back from that initial 2-hour meeting with a quote for disability to consider, so I told her to give up on Miss Sunlife and go talk to one of the nice people who stop by the blog who’re tuned in to the insurance world to figure things out and get a quote (or tell us what route we should really be taking to get one). But she’d already started with Miss Sunlife, and Miss Sunlife was nice, so she persevered. It took several more visits and lots of documentation archaeology (including lots of making Wayfare wait on hold to try to get the right documentation out of her doctors’ offices) to finally get a quote to decide on, and even then it was a quote, not a matrix of choices — each refinement to what we might want would require another visit. After many visits in person (because this can’t be done over the phone or online, obviously), we chose the options we wanted and needed, and put it through to the underwriters. Finally, Wayfare heard back: her application was denied. So she wasted hours of time and a few subway tokens, and the rejection letter doesn’t even give a reason (because her self-employment income history is variable with a recent mat leave, so she should try again in a year or two after that falls off? Because of pre-existing health issues and she shouldn’t waste her time again? Because something at the insurer got accidentally shredded and they didn’t want to ask for it again?).

It was a disappointing result, and a discouraging process: even if we were successful in getting insurance, it’s hard to believe that people who may not be fully sold on the need for disability insurance would put themselves through that massive time-sink. I didn’t even go through it myself (I am part of a group plan at work), but watching how much time it took, it will be hard for me to push freelancers I meet who really are under-insured to go take care of it.

1. This is because we live in way more space than is needed by a single-parent family — a 3-bedroom house with two freelancer office spaces. A (tragically) single-parent subset of our family could readily down-size to a 2-bdrm apartment. We also live in a massively expensive city in part to solve the two-body problem. One of us being out of the picture would free the other to move anywhere else, with a lower cost of living.

It’s Alive!

November 4th, 2016 by Potato

Wow, it looks like my desktop is back from the dead! It’s a Halloween zombie miracle!

If you’re just joining us, last night my computer gave me quite the fright when it refused to turn on (no power to the keyboard, nothing on the screen, not even POST error beeps) — it looked like I had a dead motherboard. At the moment cashflow is a bit tight, and I also don’t have time to try a million fixes, and I need my computer working well so I can work from home, so there was no clear choice on whether to try to replace the motherboard/other components and rebuild the system (or a new system from parts, minimizing cost but maximizing effort), or to just order a new PC (which would cost more).

As I was searching for information on which motherboards could replace this one (a Dell XPS 8500), I came across a forum post about troubleshooting motherboard issues on this system. One poster (thank you anonymous poster whose link I lost!) suggested the most insane possible fix, which I will repeat here both for how unbelievable it is that this should actually fix things, and in case others have similar issues in the future and come across this post in their search: unplug the computer. Press and hold the power button. Pull the CMOS battery (a little CR2032 coin battery on the motherboard, just above the graphics card). Plug the computer in, attempt to start it. Unplug the computer. Press and hold the power button. Put in a new CMOS battery. Plug in the computer and attempt to start it.

I have no idea what in the CMOS/BIOS could have been so badly broken that it wouldn’t even return an error, but I’m so glad that random internet post saved me from buying a new computer (or a new motherboard and all the time needed to unmount and remount all the components).

It reset my BIOS settings (which took some attempts to get back to make all the other stuff work) and threw some weird errors, but hey, I am back online now! Weirdest damned fix I’ve ever done (but not quite to the level of “more magic“).

I still have one super weird and unsettling symptom: my computer doesn’t boot up right away when I press power. The lights come on, the fans spin up for about 5 seconds… then the lights go off, the fans turn off… then the fans spin up again and the monitors and peripherals come on and it boots. No idea why it has a false start there, but I’m just grateful it’s up and running now.

Speaking of random fixes, here’s another recent one that might make more sense:

I keep my phone in my pocket. That means it will pick up lint, including in the headphone jack.

My headphones haven’t been working lately, and it’s been very frustrating. They weren’t working at all with my phone, and occasionally would cut out on my computer. So I got new headphones. They work fine on my computer, but still cut out on my phone, and that just kept getting worse, until three weeks ago they wouldn’t work at all. I tried jamming them in as hard as I could, and they’d work for a minute or so.

Finally a tip on the internet said to clean out the lint. So I have the little floss pick things in my desk here, and they’re actually perfect for cleaning that out. Took out a fair bit of lint packed down at the bottom, and now the headphone plug goes all the way into the jack and clicks into place. Huh, it’s supposed to click — I had forgotten that.

So if your headphones start becoming funky, check for lint in your jack.