As I’m thinking about real estate transactions, lawsuits, DMV forms, and other processes which interact with the government, I wonder if we don’t need a law to require the government to automate over the next 5-10 years.

For example, what if we passed legislation requiring key government agencies to move all paperwork online over within a 5 year period?

We could get to a world where:
* You never have to stand in line at the DMV
* Commissions on real estate transactions drop by 75%
* Taxes can be done in 1/4th the amount of time online
* Property taxes paid online
* Building permits applied for online
* No need to go to the courthouse to get married
* Lawsuits can be filed, responded to, and conducted online, decreasing legal fees by 50%.
* Voting is done online and more frequently, allowing voters to have a much more interactive relationship with their government

Obviously, some services need to be done in person, and that will probably never fully change. But for many of our undisputed processes, lets take advantage of the technology we already have!

Our current legislators pass laws which increase our costs. How about laws to make programs which save us time and decrease our costs over the long haul?

Screw stem-cell research. I don’t want to wait in line at the DMV!

I’m really saddened by how political the social security issue is. Its too bad we can’t take this problem away from politicians that are more worried about their votes next election than about fixing the problem.

I usually don’t agree with President Bush. But his willingness to tackle this issue during his second term is valiant. Second term presidents have the opportunity to tackle the tough issues because they are unencumbered by future elections, and its great to see this 2-timer get to this phase of his Presidency.

What is Wrong With Social Security?
Well, the basic problem is that each year, we take a bunch of money in, and pay it out immediately to the benefactors. This works as long as the number of workers paying in greatly exceeds the number of folks taking out of the system. Unfortunately, our census studies show that the number of retirees is going through the roof compared to the number of workers, and there will be a shortfall. There are no politics to consider here - its just plain accounting.

Time Value of Money
What President Bush has been trying to say is that Private accounts inherently have the advantage of the time-value-of-money. Here, each individual paying into the system puts his money in the bank. Each year it collects a modest amount of interest or gains, and, after doing so for 30-40 years, that small initial investment is a sizable retirement asset.

The current system cannot take advantage of time, and will always have the problem of needing a growing population of workers.

“Means Testing” Out - Can’t Trust Government Anyway
Last night, President Bush introduced the notion of decreased benefits for the wealthy. I’m not surprised by this at all, and I’ve been expecting it for some time. As a 34year old ‘worker’, I pay into Social Security each year, but I have no illusions that I will actually get anything from the government when it comes time to retire.

The fact is that Social Security will be out of money. Taxes will either have to be raised, or some people won’t get any benefits. If, during any of the next 30 years of my life, the government “changes its mind”, I could be screwed. If I were counting on Social Security for my retirement, I would be financially irresponsible. These politicians are whimsical, and we just have no idea what they will do.

Private Accounts Provide Protection
Given that many of us are already being means-tested out, why shouldn’t we have a federally sponsored system which allows us to use the time value of money for our retirement savings? Doing so helps social security problem, because those individuals saving for their own retirement means that they will not need other government services when they get old. Further, it means that these people will be immune to political winds that could otherwise touch their retirements.

Some people say “well, what if the stock market crashes”? This is a fair question. But, when I weigh my own risks for retirement, I still think its more likely that I’ll get screwed by Uncle Sam than that the stock market will crash so intolerably that I’ll lose all my money.

It does mean that individual retirement planners need to be smarter than ever before. We need to understand asset-allocations and how to shift assets to reflect the amount of risk we want to take as we near retirement. Oh my goodness - do you mean we need to take responsibility for our own finances?

Real Estate Agents are outdated. Technology can and pretty much does completely handle their meager jobs, and they are struggling to justify their existence as well as their exorbitant fees.

I’ve been hearing a great commercial on the radio lately from the California Association of Realtors. The commercial is targetting those home sellers considering the for-sale-by-owner approach. Hearing this commercial is music to my ears, as it clearly tells me that California Realtors are finally feeling threatened. Ironically, their commercial is awful. It basically argues that you should use a Real Estate agent because it will be hard to get “Bobby and Chipper to soccer practice” while you are trying to hold an open house. Could anything be more absurd?

How much do they get?
So how much do these real estate agents make? Well, they get paid a lot, but they don’t make much. A typical real estate sale will spend 6% on commissions. Here in northern California, where typical family homes sell for $1million or more, that is about $60,000 spent on real estate agent fees! Of that, 3% goes to the “buyers agent”, and 3% to the “sellers agent”.

Breaking the commission down further, the buyer’s agent usually works for a Real Estate firm (like Colwell Banker, Remax, etc). The agent will get about half (1.5%), and the firm will get about half (1.5%). So, on that million dollar house, there are two agents taking about $15K each, and two firms getting $15K each.

What are their skills?
Real Estate agents really have no skills. Part of the reason for the exorbitant commission rate is because there are just too many Agents. Because there are so many agents (many part time, semi-retired, etc), each one may only sell 2-3 houses per year. They need to maintain a high commission structure so that those 2-3 houses represents an interesting amount of money. Its not enough for them to get rich, but enough to get by.

But these people are basically unskilled. They take a few real estate classes, as mandated by law, but any common sense that they actually do have is greatly overshadowed by their need for the sale and commission. Home buying is not a repeat business. Unlike other industries, where sales people build relationships that they will use again in the future, Real Estate agents are sell-once sales people. As such, their main focus is on the commission at hand, and not the relationship. No skills are necessary for this type of salesmanship.

Technology
Alas, the point of this article is not just to expose the wastefulness of using a Real Estate Agent, but also discuss how technology solves the real estate problem.

First, in the home buying process, buyers need to be able to find the homes that are for sale. This used to be hard to do. The coveted “MLS” (multiple listing service) really was a great advantage of the real estate agents of the past. Today, however, the world wide web can completely replace the MLS - and for free or a nominal fee. A few pictures, and a standard web form can completely replace the listing mechanisms used today.

Second, “open houses”, where prospective buyers can view houses, can also be automated. Web-based calendaring programs can be used so that buyers can make appointments to view a property. Further, virtual-reality videos (often used online already) allow buyers to narrow in on the properties that are valuable to them long before ever even seeing a house. Thanks to these innovations, home sellers can really manage the process of showing the home pretty easily. Other work - such as preparing the home for sale can still be done, but as simple short-term contract arrangements, rather than a 3%
stake in your property.

Third, there is paperwork and legal forms. This is the most complicated part of buying a house, and real estate agents do take away a lot of the “fear” around this part of the process. Companies such as Help-U-Sell, however, make this much more palatable, and allow the buyer to navigate the process very easy. At the end of the day, these are just forms to fill out and understand - its a completely automatable process. Imagine a version of “TurboTax” for home buying. If our tax-code is automatable, so is our home buying code.

Non-Technology Factors
Lastly, there is the legal risk that goes with buying/selling a house. What if the seller didn’t disclose something relevant about the property? What if the seller doesn’t actually own the house? Two words - caveat emptor.

When you make any transaction these days with a real estate agent, they make you sign a huge volume of forms. Note that only about 1/3 of them are actually
legal forms that you are required to fill out. The others are all disclaimers, waivers, and notification forms from the real estate agent’s firm stating that even though you hired them to protect you, they aren’t responsible if something does go wrong. On one hand, I don’t blame them, but at the same time, what is the 3% commission for if not for a little peace of mind?

Where do we go from here?
We are fortunate that real estate demand in the Bay Area has remained strong. As long as it is a strong market and the buyers outnumber the sellers, skip the real estate agent. Its just a waste of your money. Don’t be afraid of talking to the buyer/seller directly. While your agent will tell you this is a “bad idea” - it is not. You should do it so that you fully understand the background of your home purchase. Further, you stand to save at least $50,000.

The fact is that Real Estate agents perform a service that should have a fixed fee. Regardless of the price of the house, their work is basically the same. Its the same amount of advertising, showing of the house, and paperwork regardless of the home price. And thanks to the internet, their services are not very valuable. You can do this online.

As more and more buyers skip the agents, the agent’s margin will be forced to decrease. Their lockhold on the MLS listing is already declining, and its only a matter of time before the “TurboAgent” software arrives on the shelves at your favorite software store.

Governor Schwarzenegger caused a bit of a stir when he suggested we need to “close the borders” yesterday. Apparently, this is somehow offensive.

The fact is, unfortunately, that even if we wanted to, we can no longer lock down on our borders in California. Why not? Well, we let too many Mexicans in already. Now they are here, many legally, and they vote. And they want to be able to bring their aunts, nephews, mothers, uncles, grandparents, grandchildren, nieces, etc into the US as well. How are they going to vote? Well, of course, they vote for their illegal resident relatives and their Mexico-residing relatives to be brought into the US legally. Wouldn’t you vote to have your uncle be allowed into our country?

To prove my point, consider California State Senator Gil Cedillo. This guy is so insane, he actually thinks illegal aliens should be legally issued drivers licenses in our state. No politician that wasn’t pandering to the immigrant vote would ever propose such absurd legislation. (Give legal rights to known criminals and no prosecute them for their illegal behavior? I thought our Senators were supposed to help enforce our laws?) So how does he stay elected? Well, we’ve already let enough of them into the state that they now have the power to elect him.

Some may think this blog entry indicates some sort of ethnic bias on my part. I have no ethnic bias. The fact is that those immigrating to the US from Mexico are largely uneducated and poor. 66% of those immigrating do not even have a high school education (see Center for Immigration Studies). The effect of this over the long term will simply mean a lower standard of living and lower benefits for the all of us. They will need more medical financial assistance, will be costlier to educate (they don’t speak english yet), and will consume more welfare dollars. We’ll either need to raise taxes, cut costs (like education and road maintenance for all), or lower benefits to the native poor that are already here. Oh yeah, we’re already doing those things!!!

Anyway, its very sad. Scwarzenegger, while now stating that he “misspoke”, was actually pretty spot on. We do need to close the borders to immigrants that offer absolutely no value to our society. We’ve got enough poor people here already, and we don’t need more unskilled labor. But its out of our control now. We’ve given them 8M legal votes in our state already. They’re not going to stop voting until our education systems, economic systems, welfare systems, and transportation systems are just as poor as they are back home in Mexico.

Ever had your shift key stuck? Get your machine into a state where no matter what you do, the shift key is effectively pressed and now you can’t access non-shifted keys? Wonder how anyone can ship such horrible software?

The answer is bugs in a system of windows called “accessibility”. You can access it from the control panel if you are curious, but nobody ever does, because its only used by about 3 people worldwide. But legally, it has to exist, because some do-gooder politician thought it was a good idea.

I just had the awful experience where my shift key got stuck. It just wouldn’t unstick - no lower case, no unshifted keys would work. And it was just a software bug. The only way out was once again, to reboot my machine. Going to the Accessibility Area in the control panel, allegedly Accessibility was not on. But this all occurred after I accidentally pressed the shift-key for about 8 seconds, and then the accessibility crap kicked in.

Hoping I had an explanation? I don’t. Its just buggy buggy buggy.

So here is a question for you- how does software that renders half of your keyboard useless help handicapped people? Does it? I’d love to hear from ANYONE that uses the accessibility features and couldn’t use their machine without the feature. What would happen if we didn’t have the law? Would machines really be harder to use?

I’m betting this is a case where a law was passed with good intent, but no realistic way to solve the problem. Software writers don’t use or need the accessibility features, so they spend as little time as possible to meet the “minimum” requirements. Handicapped people are left with machines that have ‘accessibility’, but don’t really work anyway, and they need to augment their machines with special-purpose software that really does the job right anyway. In the end, we’re left with yet-another-law, broken software, and a whole lot of wasted time.

From Overlawyered.com:

“A Suit That Makes More Cents for the Lawyers”
A check for 49 cents arrives in the mail, in settlement of a class action against Bank of America. A staff writer for the L.A. Times starts digging and finds that the lawyers who filed the suit are going to swallow half the $4.2 million settlement. As for residual unclaimed funds, they’re going to a charity, but one the parties are unwilling to name. (Doug Smith, Los Angeles Times, Apr. 11). On the Schwartz v. Citibank class action, filed by the same lawyer (Brian Strange) and involving the same issues.

Schwartz v. Citibank late fee class action
I just received a notice in the mail informing me that, as a member of the class of Citibank and AT&T Universal Card customers, I was eligible for a refund under the terms of a settlement agreement reached in a class action lawsuit. A quick internet search revealed the following (PDF, see last page):

“The Cards business agreed to create a settlement fund of $18 million, most of which will be distributed automatically to cardholders and to make a cash payment of approximately $9 million for attorneys fees and costs.”

My refund check is for $0.18. — Paul Prichard, Moodus, CT

According to this article, Best Buy is phasing out use of mail-in rebates! This is fantastic news. I always get ripped off by those, and I don’t use them anymore unless I’m absolutely stuck.

I wonder how they’ll do this? A lot of the rebates come from the makers of the products that they sell. Hopefully they’ll be able to throw their weight into eliminating this scam.

Nobody knows the exact statistics behind rebates, but its estimated that somewhere between 50 and 90% of mail-in rebates are never successfully claimed either due to never having been sent in, or due to technicalities in the submission process being abused by the manufacturer to avoid paying the money.

See also:
theofficeweblog
Slashdot discussion on this announcement
StopMailInRebates.com
Political Animal on Rebates
Rebate Runaround