Prosper.com Once More

I really hate to be negative about Propser.com. I really want it to succeed. I want to be able to report good things about it. It's getting hard.

Let me preface what I am saying by noting Propser.com is still relatively new and should be expected to have some bugs to work out.

On to my complaints.

1. My transfer of funds from my checking account into Prosper was supposed to be completed today. Funds were removed from my checking account on the 7th. Today, the 9th, they are still not showing up in my Prosper account. This may be the fault of ACH and not Prosper, however, so I suppose I have to cut them some slack. Nevertheless, one of the more common complaints on Prosper's discussion boards is the length of time it takes to get funds into Prosper. Additionally, I find it strange that funds going the other way are very quick. For example, to verify an account, Prosper makes two small deposits into your checking account. I've linked two accounts and both times, the deposits have shown up in 1 business day. Why does it take 5 times longer for funds to move the other direction? Even if this is the fault of ACH, Prosper is taking a big publicity hit on this. I did see on the discussion boards that they are looking into speeding this up. As I mentioned before, why do they have to use the ACH network? Why can't they use Cirrus or some other ATM network?

2. Are Lenders allowed to be in Groups? I spent some time going over the rewards program that Prosper has for group members and leaders. Besides being overly complicated, I can't find any benefits to a lender for belonging to a group. I emailed Prosper's Customer Support about this and this is the response I got:

At this time, lenders cannot be members of groups. However, if you wish to associate yourself with a particular group, you can check a checkbox on the bidding page that will add your screen name to the "Lenders who support us" list on the group home page.

This is outright wrong. I belong to the WealthBuilders Group, a group for people borrowing to create wealth in the spirit of Rich Dad, Poor Dad. My role in Prosper is defined as a Lender. There is obviously some sort of disconnect here. When I look at my Profile screen, it says I do not support any groups. When I go to the Group tab of the My Account page, under the title "My Group", it shows the WealthBuilders group. Under that, in a different section, it says "You currently do not have any active group requests and are not a member of a group." Yet if I look at the members of the WealthBuilders group, I am listed as a member.

3. There seems to be no benefit at all to a lender to belong to a group. This may be because lenders are not supposed to be allowed in groups and I was only allowed in through some glitch. I would like to see lenders be allowed in groups. That way, lenders and borrowers with common interests can be matched up easier. I would like to lend money to members of my group, especially if there is some sort of benefit to me besides the interest I get from the loan. I also think allowing lenders in a group would help foster a closer community within that group. (Of course, I want to be able to lend outside my group as well.)

I don't know. I continue to have great hopes for Prosper and I am anxious to start lending through it, but there still seems to be some kinks that are very annoying.

House 3: Estimate Clarification

I got a response to my fax to the handyman requesting some clarification of his estimate. He was checking into whether or not he could move the car legally (since I don't have title to the car). This is similar to a situation I ran into on my last rehab, so I was pretty sure there would be no problems removing it. Just to be sure, I called the Phoenix Police Department to check. (My last property was in Glendale and the city code might be different in Phoenix.) Indeed, the car is treated as an abandoned vehicle on private property and therefore, the property owner can do what he wants with it. Technically, the towing company is supposed to contact the police department with the license plate number or the VIN number to see if the car has been reported stolen. However, that is not the responsibility of the property owner. Anyway, I passed this info on to the handyman.

As for the other issues:

- The removal of the shed, folding door, and door frame at the archway are included.

- He counted three windows that needed to be replaced, so I'll trust him on that.

- He will remove the cabinets and, if there is good drywall behind it, the wood paneling as well.

- He forgot to include the new toilet in the estimate wording, but it was included in his price.

And speaking of the price, he didn't lower it :-) He also rejected my request for dates and penalties / bonuses for late or early completion. According to him, he cannot schedule the work of his subcontractors and therefore can't make promises for them. If he were to do so, the state of Arizona would consider them employees of his company. He said he has spoken with all of them and they all agree to do their best to meet the 4 week schedule. A start date will be provided as soon as he receives my first payment, which I placed in the mail this morning.

I'm not sure I buy his argument about not being able to schedule the subcontractors. He doesn't really need to. He just has to tell them when he needs the work completed by. But I'm not going to push it. He claims his motivation to finish the job is his final payment.

The good news is that he is using subcontractors. That means it won't just be him working on the job, which means it should get done faster.

When Is Automated Not Automated? (Updated)

Last Friday, I submitted a transfer of funds from my bank account to my Prosper.com account and was informed it would take up to 5 business days for the transfer to be completed. Huh? The process is automated! In fact, Prosper uses the ACH system for transferring funds and ACH stands for Automated Clearing House. Last time I checked, computers didn't sleep or need time off, so why does this system only work during business days? Does anyone have the answer?

I can use my ATM card to make a purchase at a store on a Sunday, then go home and log on to my bank's website and see the transaction posted immediately. So why can't this happen with transfers using ACH?

Of course, the obvious answer is that ACH is a different network than the one debit cards use. But this simply begs the question of why Prosper choose to use the slower ACH system rather than the faster system debit cards use...

Does anyone have any insight into this?

Update: I contacted Mary Zerrenner of Electronic Payments Network, the only private ACH operator in this country, for answers to these questions. She says the settlements for ACH items happen at the Fed (federal reserve bank). The Fed does not process settlements on Saturdays, Sundays, or holidays. Thanks to Mary for looking into this. However, the underlying question still remains: Why are the computer programs at the Fed not running on weekends and holidays?

House 3: Rehab Estimate Received - And It's A Shocker!

Last night, I got a fax from the handyman with the quote for all the work I wanted done on the property. I was in for a shock - the quote was for $23,700! I was thinking more along the lines of $15,000. True, this quote includes everything (dumpster rental for the trash, all materials, etc.), but still, it seems a bit high. Other items on the quote included the condition that the cost be paid one-third at the start, another third at 2/3 completion (to be determined by the handyman), and the final third at completion. I'm ok with that. But it also states "Any and all change orders are due at the completion of each change order." That made me take a closer look at what he included on the quote compared with what I asked him to do. I did find some discrepancies:

- I asked that the car and shed in the back yard be removed. This may be included in his general "remove trash" item, but since they are large items, I want to be explicit that they are included.

- He did not list the removal of the door frame and folding door at the archway.

- He listed "replace 3 windows." I specified two plus making sure all windows in the converted carport room are the same. My pictures don't show the entire room, and I know there is at least one that needs to be replaced, maybe more. Just wanted that clarified.

- In the room that leads to the laundry room, there are cabinets I want taken down and, if the drywall underneath is good, wood paneling taken down.

- The fireplace needs to be refaced.

- A new toilet needs to be installed in the bathroom.

I think he just forgot to list these on his quote. There is an awful lot of stuff to be done and I did give him a print out of these items. However, I want to make sure this stuff is in writing to avoid any problems later on.

Because the estimate was much higher than I expected, I also pulled out the "Is this the best you can do?" line to see if he can lower his price a bit.

And finally, because I want to make sure this project proceeds quickly, I asked him to modify his estimate to include the following stipulations: "Specify a start date. The job will be completed 30 days from the start date. If the job is finished before that start date, I will pay him an additional $100 per day for each day prior to the completion date that the job is finished. For each day after 6 weeks from the start date that the job is not finished, the price will decrease by $100 per day." That gives him two weeks leeway to accommodate unexpected things that might crop up before he starts getting hit with a penalty. The 30 day length was what he told me he thought it would take.

I faxed this info to him last night, so we'll see what kind of response I get. He originally said he could start the middle of this week and I am hoping that is still the case.

FYI, this guy is a licensed contractor (my previous handyman was not) and he is licensed for both commercial and residential work. There are no complaints on record about him.

Just in case he doesn't want to do this, I am going to start looking for another person who can handle this rehab.

Also, once all this work is done, the only things left to do will be to replace the stove (about $200) and install new carpet (about $750 - $1,000). Luckily, I bought this property cheap enough that, even if I go with this guy and he doesn't lower his quote, I should still be able to make money.

Prosper.Com Revisited

In a previous entry, I spoke about Prosper.com and the benefits and drawbacks of their service. Before going any further, I'd like to thank Prosper.com's CTO and co-founder, John Witchel, for leaving some comments here to address the concerns I raised.

I decided to go ahead and try lending a small amount through Prosper.com - no more than $1,000. It has taken a while, but I have finally gotten approved to be a lender. I spoke a bit about this in the comments of the previous post, but I'll repeat it here in case you missed it.

When you apply to be a lender on Prosper, they run a credit inquiry on you with Experian to verify your identity using your driver's license number, social security number, address, and phone number. I had difficulty at this point - my application kept getting rejected. Sometimes I was told the verification service was unavailable and sometimes I was told my identity could not be verified. After double-checking I had not typo'ed any of my information, I decided the problem could possibly lie with Experian.

Back at the end of 2004, I had requested my free annual credit report from Experian and discovered several errors, including an incorrect driver's license number. I submitted corrections and supposedly, Experian fixed them. However, the correction letter I received from Experian only listed the credit account problems that were fixed. It did not indicate they had fixed my driver's license number. So it was possible that the report still showed my old driver's license number and that was a reason Prosper's ID verification was failing for me. Since it had been over a year, I was able to request another free copy of my credit report from Experian to verify the data again. I was unable to request the report via the web for some reason, so I had to call Experian directly to request it.

In the meantime, I had continued to try getting verified through Prosper's website. One time I noticed that there was a customer service number displayed on the error screen I was getting. It appears that they only display this number during the hours their customer service is open, so I had never seen it before. I called them up and was told I could fax a copy of my driver's license and social security card to them for an alternate method of verification. I faxed the documents and the next day, I received a call saying they received the fax and it was forwarded to their ID Verification department and I could expect a call from them shortly.

The next day, I got an email from the ID Verification department. They explained they had checked their logs and discovered my application was being rejected because I had applied for a business credit card using my home address as the business address, thus, they assumed I was a business and not a person, and my application was rejected. (One of my real estate LLCs is a home-based business, which is why it shares my home address.) Prosper's staff said they modified their verification criteria and I should now be able to complete the process on-line. I tried again and it worked!

The next step was to enter my checking account information. Once they had that, they made two small deposits to the account. I had to wait two or three days to see the deposits, but once I did, I just went back to Prosper's web site, logged in, and verified the amounts. I am now fully confirmed and can start lending - something I will do so just as soon as I deposit some money into that account. As I mentioned before, I am somewhat paranoid about giving companies permission to withdraw funds from my accounts automatically, so I opened a new checking account solely for use with Prosper.

I would like to comment that, so far, my experience with Prosper.com's customer service department has been fantastic. They understood my problem right away, offered a simple solution, and were proactive in keeping me updated on their progress. I am also glad they modified their verification routines to not fail someone if a business address is the same as a personal residence address. If they did not do this, millions of people who run a home-based business would be shut out of Prosper.

I just had a thought.. At a brick and mortar bank, you generally get a real low interest rate on your money in a checking account. However, I also have an account at Ing Direct, which pays a much higher rate. Now, the Ing account is a savings account, and there are federal restrictions on the amount of electric transfers that can occur in a savings account (a maximum of 6 electronic withdrawals per 30 days), so you can't might not want to link your Prosper account to your Ing account. However, the Ing account is also tied to a checking account at a brick and mortar bank. So if you tie both your Ing account and your Prosper account to the same checking account, you can electronically move your money from Prosper, where unused funds earn no interest, to your checking account, where they earn a tiny bit of interest, to your Ing account, where they earn a larger amount of interest. When you want to lend again, run the transfers in reverse. I'm guessing it would take 4 to 5 business days for money to make it way completely through the three accounts, but that's not too bad.

Oh, I did get my free credit report from Experian and they did indeed have my correct driver's license number. There were a couple other minor errors, but I'll get those fixed shortly.

I'll post more of my experiences with Prosper once I had made some loans and start receiving payments.