...Running head: PURCHASING A HOUSE RISK PAPER Purchasing a House Risk Paper Keller Graduate School of Management Project Risk Management PROJ 595 Dr. Susan Orr August 04, 2013 Purchasing a House Risk Paper INTRODUCTION The many advantages to owning a home have been well publicized. However, the above satistics make it clear that owning a home is not without risk. To form a complete picture, you, the prospective buyer, need to consider the potential risks and disadvantages of home ownership as well. Understanding these disadvantages beforehand will give you a better chance of minimizing their impact and avoiding the fate suffered by these homeowners. RISKS IDENTIFICATION There are many risks in buying a new house such as: • The opportunity cost of investing in an alternative investment is very high because the entire cash and future income stream is tied up into one asset a home, which may or may not appreciate. • The house is an undiversified investment, so if the market tanks as it has, game over. • Knowing that we do not own our home, the bank does. • A lot of cost connected to home ownership, such as repairs and insurance and fees and potential hazards I have not considered. • If I lose my job, game over, this will put a lot of stress on me. • There is a chance that your new home will lose value. Luckily, in general, the longer you own your home, the less likely a loss becomes. Loss of value is typically a short-term problem, possibly due to the local...
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...making a decision to purchase a new house, one of the economic principles which one must consider will be that people face tradeoffs. If one decides to purchase a new house, he or she will need to give up alternatives such as a holiday, new car or new computer which the same amount of money can purchase. In this case, the decision maker will need to weigh the priorities. For example, purchasing a new house may make travelling to school and local services more convenient, however it will require one to give up the purchase of a new car which makes travelling to work more inconvenient. Depending on what the decision maker feels is more important, he or she will decide for or against the decision to purchase the house. One of the principles of economics states that trade can make everyone better off. When trade flourishes, it results in a greater purchasing power. In such a case, marginal costs appear small owing to a better purchasing power among people. In this situation, marginal benefits exceed marginal costs and it would be a good idea to purchase the new house Another economic principle which one should consider will be to think at the margin. This will involve weighing marginal benefits and costs of the decision. In this case, marginal benefits of purchasing the house will be its close proximity which will be close to schools and local services. This will be a more convenient location to raise the child. In addition purchasing a new house will provide cleaner, larger and...
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...Purchase a House Our behaviors and decisions in our daily lives are affected by economics. When making decisions, we will use economic theories either consciously or subconscious to decide if we will make or reject that decision. The same can also be used to explain our actions and behaviors when making an economic decision to purchase a house. This paper will evaluate how economics affect one’s decision to purchase a new house. First, the decision to purchase a new house is considered a large and important decision by many. This is because the prices of houses are usually very high, and thus purchasing a new house will greatly deplete the savings of an individual. The demand of houses is highly price elastic. Economic theories state that the larger the proportion of income a certain purchase requires, the more price elastic the demand will be. In the case of the purchase of a new house, it will require the spending of a large proportion of an average person’s income, hence this will greatly lower the purchasing power of the individual when the decision is made to purchase the house. Furthermore, buying a new house will require people to shift from a familiar environment to a less familiar environment and this can be a life-changing experience which may be scary to some. Hence, these are all factors which make the purchase of a new house a very difficult decision to make. There are various principles of economics that can be applied to a decision to purchase a new house. First...
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...Purchase a House Our behaviors and decisions in our daily lives are affected by economics. When making decisions, we will use economic theories either consciously or subconscious to decide if we will make or reject that decision. The same can also be used to explain our actions and behaviors when making an economic decision to purchase a house. This paper will evaluate how economics affect one’s decision to purchase a new house. First, the decision to purchase a new house is considered a large and important decision by many. This is because the prices of houses are usually very high, and thus purchasing a new house will greatly deplete the savings of an individual. The demand of houses is highly price elastic. Economic theories state that the larger the proportion of income a certain purchase requires, the more price elastic the demand will be. In the case of the purchase of a new house, it will require the spending of a large proportion of an average person’s income, hence this will greatly lower the purchasing power of the individual when the decision is made to purchase the house. Furthermore, buying a new house will require people to shift from a familiar environment to a less familiar environment and this can be a life-changing experience which may be scary to some. Hence, these are all factors which make the purchase of a new house a very difficult decision to make. There are various principles of economics that can be applied to a decision to purchase a new house. First...
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...A New House Buying a new home is not to be taken lightly. Buying a new home is going to be one of the most important decisions a person or a couple will make in there live. To buy a home is not something a person does every day. Millions of Americans consider buying a home, is taking the next step in life. Make sure that it is the next step that you want to take. The decision to purchase a new home in today’s real estate market is a considerably difficult decision to make after weighing the advantages and disadvantages. The current real estate market dictates that today is a perfect time to buy a home as prices are low and interest rates are at all-time lows as well. The real estate market is typically broken into two markets; a buyer’s market and a seller’s market. In a buyer’s market, sellers stand to lose some ground in the bargaining process because a larger number of homes on the market offer buyers a wider selection of homes to choose from. In this situation, buyers have a comparative advantage over sellers because buyers can demand incentives from sellers to close the transaction or find another agreeable seller. When purchasing a home you need to ask a lot of questions before deciding to a home. Some of the issues would be readiness, financial, and emotionally ready to buy a new home. You must also look at your budget, like your income, savings, and insurance. You should make sure that when buying your home you are ready for the long haul, because...
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...cold city of Baguio, ZIO’s Pizzeria paves its way as one of the best known Italian-Filipino fusion pizza parlor in the city. ZIO’s Pizzeria started in 2007 as a small, two-story pizza house located at # 168 Military Cut-off, Baguio City. Since becoming a hit pizza parlor, it branched out one more restaurant located # 27 Leonard Wood Road. The success of the restaurants eventually led to the birth of sister restaurant; the Kubong Sawali (well-known for authentic Filipino and Ilocano dishes) located at # 165 Military Cut-off. Under the perseverance plus the leaderships of owner Mr. Emilio S. Aglicol Jr. and his long-time partner and friend, Mr. Henry G. Revilla, the three restaurants are merged into one entity known as ZIO’s Corporation which was registered on mid-January 2013. Today, ZIO’s Pizzeria stands out as one of the most affordable and also one of the best pizza houses in the city of pines due to the persistent nature of the management and staff, countless product innovation and improvement plus the warmest of customer service. NATURE OF BUSINESS OPERATION ZIO’s Pizzeria is one of the restaurants owned by ZIO’s Food Corporation. It is a fusion of Italian and Filipino restaurant serving a wide selection of vegetarian pizzas and pastas. Aside from walk-in operations, the pizza house also have a delivery system and catering services for government and corporate meetings, parties and the likes. The company operates from 10 am until 8 pm. COMPETITIVE ADVANTAGE The...
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...A New House - Decision Tonya L. Pugh XECO/212 ECONOMIC THEORY May 6, 2012 Frederick C. Runge, MBA, PMP Growing up all I ever dreamed of was one day to get married to the perfect man, have two perfect little children, and to own my own perfect little house. I did not follow that order when getting these things; however, at thirty six years old I do have it. I am a wife, and no man is perfect I have learned. I am a mother to three beautiful and healthy children, an eighteen year old daughter and twins (girl and boy) who are nine. The house, which is perfect for us in its own right, is coming now, after a lot of hard work and sweat, not to mention a lot of planning and decision making. Locating a house in an area we want to live in is the easiest part of looking for our new home. My husband and I have chosen to stay in the area we are currently living in and renting a home. Everyone here is close and we all look out for one another. My parents are not far, so they can get our children from school and watch them until we get home from work. The local elementary and middle school is within walking distance from the houses we are looking at, as well as the local hospital, fire and police departments, church and local health clinic. Before we move any further in buying our home we need to sit down and make a list of the pros and cons for buying and renting. This is now the biggest decision we are facing in our lives and what we decided will affect us for a long time to come. We need...
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...chose a good that I have had experienced purchasing. This is a tough assignment has I have not had the pleasure of purchasing any of these goods. What I can do however is pick one of these goods and complete this assignment as best as I can. The topic I chose is other. I wanted to use purchasing a new home as this is something I have always dreamed of doing but having 12 children the possibility of owning my own home someday is slim to none. Now when I look at purchasing a new home a factor I see that could possibly affect supply and demand would be economy. I mean without the economy how will people be able to afford buying a home? Home purchases require a lot of money. Without the income a person can fall into major debt. There are many financial factors to consider such as the asking price, the monthly mortgage fees, closing costs, homeownership expenses, insurance, and additional income for routine maintenance costs or major repairs/replacements. When the economy is stable people tend to make more money and therefore the demand for houses increase. When the economy is unstable or low the demand for houses decrease. The reason this factor can affect supply and demand is because when the demand for homes increase the price for homes increase as well. This is due to having more buyers than houses available. This increase however, will make it much easier for people to sell these homes which will then increase the supply of houses on the market. Once the supply for homes...
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...A New House Decision Alycia Toth XECO/212 Professor Tsilis Purchasing a home is not only one of the most important decisions but it is also one of the biggest decisions a person can make in their life. There are so many factors that come into play when making that final decision. Before you can make a final decision on which home to purchase you have to make the decision to buy a home. My husband and I have accepted the challenge of making the final decision on whether to purchase a home or continue renting. First we sat down and made a list of all the things we needed to consider before jumping into purchasing a home. The next step we took was to make a list of pros and cons for our current renting situation and for making the choice to purchase a home. From there meeting with a relator and then a mortgage consultant would be our next step. We would like to share our process with you and why we made the decision we did. One of the first things to consider, other than your budget, is to look at Mankiw’s Economic Principles. Within the ten principles you will find how relating those to your purchase can help you in your decision. We chose to focus on the first and second principle because I felt those were the best principles that settled in on what we needed to put into perspective when making the decision. The first principle discusses trade- offs. For example, my family and I currently live in an apartment so if something breaks all we have to do is make a call to the...
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...ensure more people to become home owners, and also work to provide low-income families the opportunity to obtain homes. The Federal Housing Administration is responsible for insuring bank loans for home buying. Considering purchasing a home, it is important to know if the interest rate is important to know if the interest rate is relatively low compared to others; as well as if getting a fixed rate rather than a variable rate which can fluctuate at any time. When making the final decision of purchasing a new home, there are many factors to take into consideration and how risk and benefits may have an impact on the final decision as well as the current state of the economy. Knowing what you are looking for and what to expect to find out about all the risks and benefits when finding the place. Certain cycles of the economy will benefit the buyer and during other times, it mainly benefits the seller. Making sure to consider the marginal benefits and cost tied to purchasing a new home will assist a person that is purchasing his, or her new home during a positive time in the market as well as the economy. Marginal benefits are the benefit changes over the quantity change and marginal costs, which are the cost change over quantity change. For example, buying a new house during a recession would not be too beneficial because the benefits are out-weighed by the marginal cost. During a...
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...evaluation of the advantages, potential disadvantages, and managerial considerations of purchasing outside stores services. Advantages of purchasing outside stores services: * A purchase price saving of approximately 6 percent can be realized on approximately 90 percent of the items purchased. Assuming that this 90 percent includes a proportionate number of high-value items, minimum purchase savings should approximate $48,000 to $50,000 per year ($900,000 x .90 x .06 = $48,600). * If the stores operation is discontinued, personnel and facilities operating costs can be reduced approximately $200,000 per year. (This assumes that the four individuals can be absorbed on an attrition basis elsewhere in the organization, and that the freed-up space can be used for other productive purposes.) * If Futronics is able to enter into a systems contracting type of agreement for three years with one of the supply houses, the incremental supply ordering costs in purchasing will decline markedly. This is a very significant operating efficiency which will free a buyer up to engage in additional analytical purchasing work. * Discontinuance of the stores operation will virtually eliminate the time requirements for supervision of the operation. Similar to item number 4 above , this additional time can be used by purchasing personnel to do a more productive and professional job of purchasing. * Futronics now has 42 operating sites. As the organization continues to grow...
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...crashed the availability of loans and financing of a home became very scarce. Because of the availability of home loans and financing it has made the supply of new homes go down, with no loans or financing there is no money to be able to afford land to build on or to pay a skilled contractor. When there is no availability for new homes the demand seems to be higher. When the supply is affected in the housing market the prices seem to be lower there for there is a higher demand for house, because it has now become affordable to buy. However, one of the factors that can affect the demand is the price of a new home along with the consumer’s income. When consumers are looking into buying a house everything is based off the amount of income that they bring in. If the consumer’s income is to low then they will not be able to purchase their new house. Because the prices of a new home seems to be relatively more than people can afford with the current amount of job loss, lower income the demand of purchasing a home has dropped. The value of real property is determined by the principle of substitute. The principal of substitute is simply the price a person is willing to pay for a property is influenced by the cost of buy the substitute or comparable property. This means if a home is selling at $175,000 and another home right down the street is...
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...Checkpoint: A New House – Readiness This particular project is very close to me, as I am currently pregnant and am working to purchase a house for our family. When reviewing the ten principles of Economics, there are several that play a major role in my decision to purchase a house. First, we as a family needed to understand that there are tradeoffs that will need to be made in order to budget in a house purchase. Frivolous spending such as eating out and purchasing various technological gadgets will have to be monitored more closely and possibly stopped altogether. Also, any old debt would need to be paid off first to make room in the budget for the new debt of the house payments. In order to understand what items are considered frivolous and what old debt is priority, we will need to develop a short and long term budget that addresses where we are currently and where we want to be, and lays out a course of action to meet those goals. Also in the budget and course of action we would need to identify the incentives of purchasing a house, as well as the consequences that can occur. For example, what are the positives of the neighborhood and schools in the area? If one or both of the income providers lost their jobs or became unable to work, what plan of action would take place? These questions and many others would have to be taken into consideration to understand the pros and cons to purchasing a...
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...Purchasing a Home Purchasing a home is a major decision that must be well-thought-out. When consumers are deciding to purchase a home there are many dynamics that must be taken into consideration. Available substitutes that should be considered, complements that are necessary for when you purchase a home, and the price which can be affected by necessity as well as factors that could cause changes in supply and demand. There are many substitutes, or alternative, available for consumers who are considering purchasing a new home. Before deciding to make the commitment involved with purchasing a home, consumers should consider renting instead. With a set monthly payment and a contract that entails a much smaller timeframe, this option is better for some. Condominiums and townhouses are also substitutes for purchasing a home. These can be available for both renting and purchase, and the cost is quite a bit lower for these options. Mobile homes can also be a substitute for purchasing a house. Consumers must carefully weigh the options to see which alternative is best for them. Complements are also something that must be considered when purchasing a home. These are items that are necessary to be purchased along with a home. Insurance is a major necessity that must be purchased along with a home. This is not usually an option, but actually a requirement included in most contracts for home purchases. When one chooses to purchase a mobile home a complement that must be purchased is...
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...funds for innovation. Therefore, it seems like procurers play an important role within firms. But how the firms could achieve best value for money in procurement management? It seems likely that firms should seek to ‘get their own house in order’ before attempting to deal with suppliers. This essay aims to discuss this issue and illustrated the discussion with some successful examples. In the following sections, it shows a standard purchasing & supply management process. Additionally, the factors of outsourcing decision will be pointed out, organization buying behaviour will also be included in the essay. 2. Purchasing & Supply Management Process 3.1 Standard Process In Figure1, this is a commonly standard purchasing and management process which used by different sizes of firms worldwide. However, some smaller entities probably skip some stages of purchasing process, but basically it appears sequence of operating procurement principle. It illustrated clearly that the best value for money involves internal and external management, not a single one can be omitted. And it is also a strongly evidenced that before firms manage suppliers, it should be get their house in order. Figure 1: Standard Purchasing & Management Process Source: Canvas, SP&SM,...
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