Fine Print - October 2009

The realities of realty
By G.D. Gearino

On Sept. 17, 2007, a for-sale sign was jammed into the front yard of my home, which I had bought just 2 1/2 years prior (which is to say, near the peak of the housing market). Thus began my education in real estate, a learning experience that dovetailed almost exactly with the national housing meltdown. Yep, buying high and selling low. That’s how I roll.

I write this in early September, nearly 24 months later. The sign is still there. If I had known then what I know now, I could have shortened the process and saved myself much anguish. I could have, for instance, priced my house to sell instead of for a big payday. I could have acknowledged that buying and selling real estate is a simple exercise in free-market capitalism — not judgment on my decorating choices, landscaping prowess or housekeeping abilities. Or I could have forgotten the whole idea and focused on pursuits less painful with results more predictable. (Such as shaving my bald pate with a cheese grater each morning, to cite one example.) But the lessons best learned are those hardest earned, and because my heart is larger than my equity, I’m happy to share what I now possess in the way of real-estate wisdom.

1) Whenever a magazine or Web site declares that real-estate values in your town are bucking the downward trend, let healthy skepticism be your guide. Magazine editors love lists, and a popular theme these days is some variation of Top 10 Places To (insert subject here: Buy a Home, Sell a Home, Regret Your Liar’s Loan, etc.). For instance, BusinessWeek recently assembled a roster of the “strongest” housing markets and put Fayetteville, Burlington, Jacksonville, Durham and Greensboro on the list. Problem is, as the Burlington Times-News pointed out, the rankings were based in large part on tax valuations, and those assessments are often wildly detached from market realities. (More on that below.) Even people in Burlington’s real-estate industry, whom you would expect to be celebrating it, cautioned against placing too much faith in the ranking: “I take it with a grain of salt,” one agent told the newspaper. I had a similar reaction to Money magazine’s recent survey of housing in the country’s 100 largest metro areas, which showed that the Raleigh market (where I live) was rock-solid stable — in contrast to 91 others that should expect further declines. If that’s truly the case, why is the phrase “price reduced” so common hereabouts?

2) County tax assessors have become the embodiment of the see/hear/speak-no-evil monkeys; they acknowledge no change in real-estate values. The house across the street from mine has a tax value of $342,000, according to Wake County records. It sold in June for $265,000, 22% below its assessment. My house has a tax value of $335,000, and I just accepted an offer of $266,500. In fact, I would be willing to bet that every home in the county that has traded hands the past year sold for significantly less than its tax value. There eventually will be a day of reckoning when enough homeowners realize they’re expected to pay champagne taxes on beer properties. Mark-to-market accounting shouldn’t apply only to private business.

3) Being both a seller and a buyer in the same market is a profoundly bipolar experience. Even before my house went under contract I visited a hundred or so homes on the market in the optimistic belief than an offer for mine was right around the corner and I needed to be ready to move elsewhere. Though I bristled at the occasional suggestion that my home maybe, possibly, could be a tad overpriced — which, in hindsight, it obviously was — I never hesitated to chortle contemptuously at the asking prices of other sellers. “They’ll never get that for this house,” I’d sneer as I wandered through a home. “They’re pretending the downturn never happened.” But right up until the end, I held fast to the belief that I should walk away with at least as much money as I’d put into my home, and preferably even more.

4) If ever there’s a field ripe to be made obsolete by technology, it’s real-estate brokerage. There is no objective reason for real-estate agents to exist these days. Buyers and sellers can easily find one another online, and thanks to the endless data capabilities of the Internet, anything you need to know is readily available. From the comfort of your easy chair, you can take a video tour of a home, use Google maps to walk around its neighborhood, check crime statistics for the area, find out what the house next door sold for, etc. At this point, the most useful skill an agent brings to the table is knowing how to open the little lockbox where the key to an available home is secured. Yes, it’s an important task — then again, so was operating a telephone switchboard. When was the last time you talked to a phone operator?