Wednesday, October 18, 2017

When Stocks Keep Giving After You Have Sold Them

Over a year ago, I wrote this piece about how to go paperless. As a small aside in the post, I said:

(I have been involved in some class action lawsuits regarding stock purchases made years ago, so I felt I should keep all my old brokerage statements.) 
Class action lawsuits against companies are somewhat controversial. On the one hand, they do serve a valid purpose of holding companies accountable when they wrong a large number of people for damages that would be too small for any one individual to sue for. On the other hand, there are a lot of questionable lawyers that abuse the process and use class action suits as a way to generate income for their law firms.

No matter your position on them, they are here to stay and when one comes my way, I will take advantage of it.

Today, I reaped the benefits of my paperless lifestyle. I received notification of a class action lawsuit against THQ (who was actually an old employer of mine). To receive a claim from the lawsuit, you need to submit proof that you bought or sold THQ stock within a certain time period. That proof needed to be in the form of brokerage statements.

If I did not have electronic records, I wouldn't even bother tracking this information down. The time frame in question was between May, 2011 and February, 2012. I've got a lot of brokerage accounts. It probably would take me a couple of hours to go through paper copies looking for transactions involving THQ stock.

eStatements to the rescue!

Because I have gone paperless, all my statements are stored in .PDF files. Furthermore, Windows can read .PDF files and can index the contents. So I just navigated to my brokerage statements folder on my computer, typed "THQ" in the Search bar, and bam! I got a list of all my statements that contained THQ. Because I use a naming convention based on the date, I was able to easily find the three brokerage statements I needed for the class action suit.

I Was Just Paid $600 An Hour!

I printed them out, filled out the claim form, and mailed it in. Total time spent: about 30 minutes. Based on the claim form instructions, I should receive about $301 from the lawsuit. Not bad! And it's even better when you realize that I just made more money from stocks I sold over 5 years ago!

If you want to go all out with the class action lawsuits, you can visit for a list of hundreds of class actions lawsuits you might be a party to.

Wednesday, October 11, 2017

Pie-Based Investing with M1 Finance

Pies are delicious and with the holidays approaching, I'm looking forward to the cornucopia of pies that my family seems to produce this time of year. Those pies do a great job expanding my waistline, but they don't do so well when it comes to expanding my financial accounts.

Financial Pies

 Enter M1 Finance. This innovative new way to invest combines the automation of robo-brokers with the flexibility and control of a traditional brokerage account.

The concept is simple. You define a pie chart showing how you want your investments allocated - say 20% in conservative investments, 20% in stock of one company, and 60% in a mutual fund - and M1 does the rest! Each time you make a deposit, which can be scheduled to occur on a regular basis, M1 will purchase equities in the proportion your pie directs. M1 even purchases fractional shares, so your money is always invested as quickly as possible. No waiting around until you accumulate enough to purchase a full share!

Don't know what your pie should look like? M1 offers professionally created and managed pies for a variety of investments styles and objectives.

Over time, some assets will outperform others and your pie may get out of balance. A simple click of  a button will rebalance your investments. If you are using a pre-defined pie, this is done automatically for you each quarter.

Of course, all this can be done on your phone or tablet with their easy to use app.

How Much Does It Cost?

M1's pricing structure beats a traditional brokerage any day. Rather than pay a commission on each trade, M1 charges a low flat fee based on how much money you have invested with them. Your first $1,000 is free. For balances between $1,000 and $100,000, the fee is only 0.25% per year. Accounts large than that get a lower fee of just 0.15%. Keep in mind this is for unlimited trades. Rebalance every day if you want.

Regular Investing Is The Key

Studies have shown that the best way to build wealth in the stock market is to make regular investments. M1's combination of regular, periodic deposits and fractional share purchases ensure that you are able to get invested quickly and often. Furthermore, regular, periodic investing is the basis of dollar cost averaging, another proven technique to help manage risk.

There are no setup fees and accounts under $1,000 are free, so you have nothing to lose by trying them out! Click here to open an account.

Note: From time to time, I may recommend products or services. I may receive some form of compensation. See my disclosure page for full details.

Wednesday, October 4, 2017

Goal Update: End of September 2017

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of September, 2017
Current value: $34,964
Change from last month: +$1,099
Percent of Goal:  32.15%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

I saw an increase of almost $1,100 this month. Net income from my online courses was $94.89. Income from my ebooks was $1.16. I also received $7.72 from a class action lawsuit settlement.

My cash-backed naked puts of Realty Income expired out of the money and I was able to keep the $266.70 premium I collected last month. I've got a limit order in to try selling some again for another 8% ROI and I need the price of the stock to drop a little bit before that order gets filled.

This month I also published my online SQL Servers courses at a new site:! Their revenue model is a bit different from Udemy's model. At Udemy's, students purchase individual classes and the instructor gets a portion of the purchase price. At SkillShare, students can subscribe for as little as $8.25 per month and they get unlimited access to ALL the courses on the site - so far that's over 17,000 courses. Instructors are paid based on how many minutes of their courses have been viewed. It will be interesting to see how my income numbers compare between the two sites.

If you are interested in learning about many different topics, SkillShare looks to be a very cost-attractive way to go. They do offer free courses that do not require a monthly subscription, but if you would like to join, please use this link and I'll get a small kickback that will help me get my Tesla a little bit faster. (You don't have to take the class that link points to. Just use it to sign up and take any class you want, even if it's not one of mine.) My courses can be found at

Relocation Update

Escrow closed on our new house last week. We're waiting for new paint and carpet to be installed and then we will move in. Unfortunately, it looks like that won't be until near the end of October.

Net Worth Update 

Our net worth rebounded from last month, showing a gain of $20,880.That's pretty much exactly what our earnest money deposit was. If you recall, last month we paid it, but we didn't technically own the house yet, so it looked like a big debit to Mint. Now that we actually own the house, that amount is showing up as equity in the property.

Mint still can't access my 401(k) provider's website, so Mint is showing my 401(k) about $4,000 lower than it really is.

August 2017September 2017

Our cash took a huge drop as we paid our down payment for the house. Our credit card total shot up because we've been charged for our new carpet. We've got money in the bank to cover that. I'm just waiting until I get my bill to pay it.

And yeah... We've got a half a million dollar mortgage. Welcome to Washington!

If you have any questions or suggestions for topics, please drop me a line in the comments section!

Wednesday, September 20, 2017

The Crazy Seattle Housing Market

I just bet $20,000 that a house has nothing seriously wrong with it, based on nothing more than a 10 minute walk-though by myself and my wife. Although I enjoy going to Las Vegas, I’m not usually one to make such large bets. Seattle forced me to.

This Market Is So F-ing Crazy!

Housing markets vary across the country. In Arizona, when we sold our house a month ago, the market was fairly depressed. Prices had rebounded some from their all-time lows, but it was still considered a buyer’s market. There were more people looking to sell their homes than people wanting to buy one. This put downward pressure on prices, as any student of supply and demand can explain.

The Seattle area, on the other hand, is completely the opposite. Partly due to the many large tech companies headquartered here offering high paying jobs, many people are moving here and housing is scarce. There is not much un-developed land to build new houses on and what contractors are doing is buying up blocks of 5 to 10 existing houses, tearing them down, and building new ones in their place. Even existing homes are sold usually with a week. They could be sold in days, but most sellers wait for a week to get all offers and then choose the highest one. Basically, every home on the market is sold at a silent auction.

The New Home Process Turned Us Off

When my family first moved here, we were looked at buying a newly built home. New developments usually consisted of 10-20 homes or fewer. The builder would release the homes for sale one at time, usually at the rate of one every two or three weeks. If you wanted one of these houses, you needed to jump through a bunch of hoops. First, you had to apply for a loan using the builder’s lender. You didn’t have to end up using them, but you had to go through the whole pre-approval process with them, presumably so the builder knew you could afford to buy the house. Then, you had to get on an email list and be prepared to make an offer at a moment’s notice.  This is how the process works:

When a new home goes up for sale, people on the mailing list receive notice of the sale at 5 PM the day before. You then had to reply to the email with your offer before 9 AM the following day, telling the builder how much you will pay. The builder picks the highest offer.

Yes, the selling price is only a suggestion. The market is so crazy here, people are paying MORE than the asking price, even for new construction.

Did I mention most of these new houses don’t even have models built? You’re buying based on drawings.

If your offer was not accepted, you get to wait for the builder to release the next house. You can bet the next asking price will be $50,000 or more higher than the one for the last house you bid on, and that’s not counting how much people will bid over the asking price.

Used home sales are even crazier

If you want to buy a used home, you have the same general auction-like process. Most homes go up for sale and there is an open house the first weekend it is listed. The agent then collects all the offers for one week and, at the end of the week, the buyer selects the one they like the best. But for existing homes, there are some added twists.

In a normal market, a bid for a home usually includes a clause stating that you can get a home inspection and if the inspection turns up something wrong with the property that the seller refuses to correct, you can cancel the contract and get your deposit back. Not here. In order for your offer to be considered, you have to waive your right to cancel based on the inspection results. Or rather, you waive your right to get your earnest money deposit back if you cancel.

In a normal market, a bid for a home usually includes a clause stating that if you can’t obtain financing, you can cancel the contract and get your earnest money back. Not here. Don’t even bother considering to submit a bid unless you are pre-approved. Not pre-qualified. Pre-approved.

In a normal market, if the appraisal comes back lower than the sales price and your bank refuses to loan you more than the appraised price, you can cancel your contract. Not here. In order for your offer to be considered, you have to waive your right to cancel based on the appraisal. This means if your appraisal comes back $50,000 less than the sales price and your lender won’t let you borrow that extra $50,000, you have to come up with that $50,000 yourself. Or cancel the contract and forfeit your earnest money deposit.

In a normal market, an earnest money deposit is normally $1,000. It’s typically just a token, yet somewhat substantial, amount to indicate you are serious. When I sold my house in Arizona, the buyer put up $10,000 in earnest money, which I thought was a huge amount.  Up here, the typical earnest money deposit is $20,000 or more. Non-refundable upon contract acceptance. If the sellers accept your offer and you cancel for any reason, kiss that money goodbye.

Oh, and another thing. Your earnest money isn’t held until the sale is complete and escrow closes. For your offer to even be considered, you need to not only make the earnest money non-refundable, but also specify that it can be released to the seller within 5 days of contract acceptance.

And finally, your offer better include an escalation clause, or in layman’s terms, your silent auction clause. This clause says something to the effect of “we’re offering x dollars for your home, but we’ll actually pay up to y dollars if someone bids more than us and we will beat the other higher offer by z dollars.” Might was well shop for a house on eBay.

In this ultra-seller’s market, you basically give up all your rights to a refund of your sizeable earnest money deposit. And then you hope someone else doesn’t come in with an all-cash offer.

Our experience

When we heard about the crazy way new homes were being sold, we decided to ignore new homes altogether. The whole process just reeked of those Black Friday Christmas sales that start at 4 PM on Thanksgiving where people get trampled to death. The fact that each new home was priced at least $50,000 more than the last also turned us off.

So we turned to used homes. We found one we liked priced at $600,000 that had just come on the market. We made an offer with all the “must-haves:”

  • A $15,000, non-refundable earnest money deposit. 
  • The money would be released to the sellers 5 days after escrow opened.
  • We offered $625,000 and stated we would beat any higher offers by $5,000 up to a maximum price of $685,000.
  • We waived our rights to an inspection and waived the financing contingency.
  • We also offered to let the sellers live in the house up to 3 months after closing, rent free, while their new house was finished being built.
  • At the advice of our agent, we also included a personal letter saying how much we loved the house and hoped to live there. Tugging at the ol’ heartstrings can’t hurt.

We thought that was a pretty solid offer. Nope.  We did not get the house. There were 19 offers total (after only being on the market 1 week).  Final sales price: $750,000

Yes, the house sold for $150,000 MORE than the asking price.


This market is unsustainable. A crash has to be coming.

The Part Where We Prevail

We were quite depressed after losing out on our first offer. Things looked bleak and I wasn’t sure how we were ever going to buy a place. A week or two later, another property came on the market that we liked. It was an older home, priced at $595,000 and smaller than the other homes we looked at.

We put in an offer and were hopeful for a variety of reasons. There were not a ton of people at the open house. The house also did not have some of the features most people seemed to look for in a house these days: The two guest bedrooms were a bit on the small side, so I figured it might not suit the needs of many people. Because our daughter will be heading off to college in 5 years, we felt we could make do with the smaller rooms. The master bathroom and closet were small. If we got the house, we were planning on remodeling those areas in time, so we’d live with it until then.

On the positive side, the kitchen was newly remodeled and pretty nice. The backyard was also very nice. It wasn’t huge, but it was tiered with nice gardens.

Our offer was:
  •  $620,000 and we’d beat higher offers by $5,000 up to a max of $663,000
  • We waive all the financing and inspections again. 
  • Our earnest money deposit was $20,000, non-refundable and available to the sellers after 5 days.
  • We also included another letter saying how much we loved the house.

The seller was accepting offers until Monday at 10 AM, when they would make a decision. My agent kept pestering the selling agent to gauge what the interest was. The Friday before offers were due, there had been none received. Wow. Our hopes rose.

We submitted our offer on Sunday and, at that point, there were still no other offers. This was looking good, although now I was starting to wonder if there was some fatal flaw others had seen that I had missed.

Ten AM Monday came and went without a word. At noon, my agent called theirs and was told there were a total of three offers and their agent was on her way to meet the sellers now to go over them. Their agent confided that she thought ours was the best offer.

Wow. Only three offers. I liked those odds.

Hours more went by, still with no word. It was not until around 5 PM that we finally heard back. We got the house! And at our initial offering price of $620,000! Their agent did say that the sellers liked our little note about the house. They were a couple in their 70s and I think they wanted to know their house would be going to a family that appreciated it.

As of this writing, we’re still in escrow and all is looking well. Once we own the house, we’ll get an inspection to see what all needs to be fixed. We’ll also re-carpet and paint and then move in.

It's Not Impossible. You Just Have To Be Different Than Everyone Else.

So there you have it. Even though this is a really tough market to buy a house in, we managed to get our second offer accepted. I think the secret was to be willing to accept a slightly non-typical house and try to make a personal connection to the seller. We still had to pay $30,000 over the asking price, but in the current environment, I’m fine with that.