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Meli Gerogianis, e-PRO

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Understanding How the Tax System Works

11-01-08
Meli Gerogianis, e-PRO

A friend of mine e-mailed me this well written article. Regardless of your political views and the candidate you support and will vote for, please read it and try to understand it. I found it very interesting and true and I don't think I can say anything else about it other than:

1. For those who understand, no explanation is needed.
2. For those who do not understand, no explanation is possible.

An Explanation of the Tax System
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by $20. 'Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected . They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 ( 25% savings).
The ninth now paid $14 instead of $18 ( 22% savings).
The tenth now paid $49 instead of $59 (16% saving s).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man,' but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I!'

'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier. And that would present a very challenging scenario.

By:
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

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Referrals - how you treat them

10-25-08
Meli Gerogianis, e-PRO

Hello everybody! I was just curious and wanted to pick your brain on what do you do when you get a referral? How do you reward your wonderful friend, past customer, neighbor, and everybody that thought enough of you and your service to send business your way?

Do you send out thank you cards, coupons, letters, a small gift? Let me now some of your ideas. I love when people go out of their way to help and I really want to show them that their help is very much appreciated so they can keep on remembering me and sending business my way, at the same time they know that I don't take it for granted :o)

Look forward to your ideas!

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What do buyers want

10-25-08
Meli Gerogianis, e-PRO

They want the best house, lots of square footage, the latest features, lots of acreage, a good view, tile, hardwood, latest appliances, a great price, (preferably 20-50K under market value), no closing costs to pay and close in 3 days. Oh I forgot to add with a credit of 480 and $200 in the bank... and make sure that you show them every house on earth and with a smile.

Sounds too much! Well, that was my last buyer! He dragged me from house to house and kept finding excuse after excuse of not getting together with the lender for prequalification. I finally put my foot down and said: until you get pre-qualified we're not looking at any more houses. So, he did, or tried to. It turned out that with his credit and available cash, he couldn't qualify to buy a TV never mind a 250K house he was looking at.

I tried to stay positive and told him if he would keep working on his credit, I'd keep sending him listings and eventually we'll work something out. However, I suggested that he might want to adjust the price of the house he was looking to purchase. OMG! The indignation on his face! How dare I suggested he couldn't afford to buy the house! (I mean he did have a whole ONE checking account with $205 in it!!!!!!!!!! OK! I was dumbfounded! I really, really wanted to ask him how he was planning to pay for closing costs, downpayment and monthly payments of $1,400/month, but I decided to let it go! Some things are not worth our time.

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Don't be too quick to conclusion

10-25-08
Meli Gerogianis, e-PRO

I had a buyer the other day that thought was a gonner. I've been trying for many months to get somewhere and got nothing. nO answeres to emails no answers to phone calles and I had pretty much given up on them

I figured I'd keep up and see what happens. All of a sudden they call and now they want to buy two houses, the daughter is in the market as well. I guess it's a good thing I hung in there and didn't quit on it. you never know

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Should the seller consider a lease option?

10-25-08
Meli Gerogianis, e-PRO

The fact of the matter is that the market is slow and some houses are sitting on it for longer than usual. Some sellers are upside down on their loans, some have to move due to job relocation and don't have the luxury of paying two house payments, and the house value keeps going down the longer it sits on the market... What's a seller to do?!

On the other hand you have buyers that can't quite meet the credit requirements or the downpayment is just a little short of what is needed, closing costs are more than they can afford... you get the picture. Lease option might be a good solution to bring together the seller and buyer in need.

Seller's benefits:

  • The rent will hopefully cover the entire mortgage payment and releive some of the financial strain.
  • Riding the market to hopefully a better one and be able to recover some of the lost value of the house.
  • The downpayment the buyer will put in, will hep provide additional cash for moving out if still in the house.
  • The buyer considers it his/her home and takes care of the place to include the maintenance.

Buyer's benefits

  • Renting a place that eventually will become your home - no need to move again
  • Has more flexibility on small improvements and pet allowances than a rental
  • If you need extension time, it is very likely that you can work with the seller on getting an additional 1-2 months till loan is approved.

However, there are things that the seller should keep in mind and be cautious about.

  • DO NOT do a very long lease. Start at 12 months, preferably 6 months.
  • Do not offer any closing costs paid to buyer if you have to wait a year to cash out of the deal.
  • If you have to extend the lease for another 6-12 months, make sure you adjust the price to reflect appreciation, also charge an additional $1,000 non-refundable fee for having to wait another year.
  • Remember: You, the seller are tied into the contract. The Buyer IS NOT. They can walk out anytime. That is why it's called an OPTION!
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