Monday, November 18, 2013

Ale sold his old iPhone to a nice Nigerian lady... Not!

Ale was very happy yesterday because he had sold his old iPhone on eBay for a great price. Last night he asked for my help to send the buyer an invoice. I was about to do it when I realized the buyer's address was in Nigeria. Oh, oh. Not good. Did the buyer have a credible reputation on eBay? Nope. Brand new account. A quick online search exposed the scam: buyers from Nigeria send sellers fake PayPal receipts asking for shipping tracking numbers in order to clear the funds. The products are shipped and the money is never sent. Fortunately we caught this one in time.

What are warning signs of scams?

- Deals that are too good to be true often are... The buyer had offered to pay the full price plus a generous shipping premium.
- Lack of reputation. Try to do business with people you know or whose reputation you can somehow validate. 
- Unusual stories should arise suspicion: in this case, the buyer was supposedly sending the iPhone to her aunt who worked at the US embassy in Nigeria.
- I often sell my used kitesurfing gear online. Sometime scammers contact me and they usually use language like "I am interested in your item". No legitimate buyer would say that. Legitimate buyers ask questions about my kites and boards, their use and other such things.

I mentioned to the boys that iPhones and kites are relatively trivial things - worst case we lose a few hundred dollars. But the stakes can be MUCH higher. Plenty of people have lost their life savings to unscrupulous scammers, and not just from Nigeria. Remember Bernie Madoff & Allen Stanford...

Friday, November 15, 2013

We are too Picky

As I mentioned a few days ago, Cindy and I are trying to purchase a second home. We are negotiating with the sellers and have a serious disadvantage: we are picky. We are only interested in houses that meet many criteria.There are VERY few houses that meet all our criteria. When we find one, we are willing to pay a premium for it because it would take us a long time to find another one. The more special something is for you, the less negotiating leverage you have.

Contrast our situation with someone who would be glad with any of dozens of possible houses. This person could negotiate more aggressively and pass on many houses because he has many alternatives. But, can you "become" less picky? We've tried without success. We like what we like... Fortunately, we are not picky at everything, so we can "pick our battles". We optimize those things for which we are not picky and focus our resources on those things for which we are. And, needless to say, when we find that special something that meets our "pickiness", we go for it.

Tuesday, November 5, 2013


One of Paco's friends told him he didn't think allowances were a good idea. Why should kids get "free money"? They should learn to work for their money. Ale said that allowances taught kids how to manage their money. How much to save, how much to spend.

I asked Paco if his friend received an allowance. He doesn't. So how does he buy an afternoon snack or a movie ticket? His parents pay for it. The point of allowances, I explained, is not to give kids "free money", but to teach kids to manage their own money. Instead of paying for all their expenses, like his friend's parents do, we give them a modest allowance that they must manage. I agreed, though, that we are sometimes guilty of paying for too many of their expenses anyway, so that their allowance ends up being like free money. But we can easily correct that ;-).

We spoke a bit about the importance of saving for large purchases. For example, Ale mentioned that if he were to get a car, he would love a VW Beetle. I told him that a new Beetle costs $20K, not an amount he will accumulate with allowances and birthday presents alone. But some work and investing his savings carefully should get him well on his way.

Monday, November 4, 2013

The important things in life

Last Monday I woke up in an existentialist mood. I asked they boys what they thought were the most important decisions in their life. All agreed that choosing their significant other and their profession were the top two. Ale & Paco also included where to live.

How do we know if we've made the right choices? We check. Periodically. Are we still enjoying our job? Do we still love our spouse? Do we still wake up every day happy with our choices? Of course we all have bad days, but if we start having more bad days than good ones it is probably time for a change. And the sooner the better. Leaving a job, girlfriend or town might seem "undoable". Yet if it is the right thing time only makes it harder. Furthermore, most people find that, after the initial shock, things are not as hard as one imagined and are often much better, e.g., you find a better job or meet a new person. People who make major life changes rarely regret them, but often regret not making them sooner.

That was a bit heavy... Oh well, these conversations can't all be "fun and games"!

Friday, November 1, 2013

Buying a house

For many years Cindy and I have been on the hunt for a weekend/vacation home. We recently discovered a promising property. We love the location but the house has numerous "issues" that need to be investigated. For example, part of the deck is on the neighbor's land  - and there is no formal agreement about this. There are also limitations regarding the ability to remodel the house (which desperately needs work).

After viewing the house with our broker I told him that I would be up for making an offer for the house before any of the issues were resolved. I would simply factor the issues into the offer price, and tell the sellers that I would make a higher offer if the issues were addressed. My broker suggested a different approach: making a (higher) offer that assumes the issues can all be resolved, but make it contingent on resolving them. I explained to the boys this morning why I preferred my approach:

1) Offers have inertia and create "anchors". If I start with a high number it would be difficult for me to negotiate a lower one, even if some of the issues remain unresolved. Much easier to start with a low number and raise it as issues get resolved. In negotiations you are better of if the other party is the one that needs to work to change the offer - while you are OK with the terms as they are.

2) Related to the last point, I want to put the onus on the seller to resolve the issues so that I raise my offer.

My broker argued that a higher offer that is accepted would lock out other potential buyers while we look into the issues. Yet this would likely put me in a weak negotiating position. Why? In all likelihood some of the issues will be resolved and some won't. So I would be faced with the option of paying the higher price even though not all issues were resolved, or withdrawing my offer altogether. Much better to be ready to raise my initial offer when issues get resolved.

Unfortunately a real estate broker's compensation is not aligned with the interests of a buyer. Since they earn a commission based on the sale price their economic incentive is for the sale price to be as high as possible. Furthermore, since they only get their commission in the event of a transaction, their economic interest is for a transaction to occur, regardless of whether it is good or bad for the buyer. When someone is helping you, it is important to keep in mind their motivations and incentives, particularly when they might not be aligned with yours...