Monthly Archives: September 2011

Ass Forward Through the Window of Opportunity

Anyone disagree when I say this is one tough market to sell in?  Any dissenters lurking in the ranks?  What about the easy flipside of the collective coin – buying?

Sorry.  No matter how many of you might wish it wasn’t so or how many rabid boosters there are waving rally flags and raving about all the golden opportunities this big smiley-face button of a  “buyers market” offers us … the fact remains:  this is also one tough market to buy in – for all kinds of convoluted reasons that fly in the face of simplicity.

You may have noticed, real estate is getting more complicated.  Like most other things in life.

So, if it is a hard market to sell in and a hard market to buy in, then how exponentially hard is it to do both things at the same time?  How does it work?  How does someone wrap their brain around the notion of going onto the market and out into the market, simultaneously, armed with the flawed uncertainty of a “contingent” offer?

Since the well-being of real estate is partly dependent on figuring out how more buyers can sell and more sellers can buy,   we’re going to spend a few columns exploring the nuances of what I’ll call the CO-dependent marketplace – as in Contingency Offer.

Eventually,  I’ll either get tired of talking about our COdependent tendencies or you’ll get tired of listening. In the meantime, we’re fittingly stuck with each other until we can both figure out how to break the pattern and move on.

If this were 2005-2006 we wouldn’t be having this discussion. It wouldn’t even be a blip on the radar screen obscured as it was by the opium cloud of irrational exuberance.

What did people do way back then if they wanted to sell their current place and buy a new one?  Simple, they just threw out the status quo and proceeded ass-forward through the window of opportunity.  They didn’t have to sell first in order to buy. That was the old economy.

All the tools were in place to ignore the little voices of reason residing inside our heads. The ones that whisper cautious mantras in the middle of the night.  The same ones that have staged a full-blown coup and are now shouting down any decision that contains even a hint of risk.

It went something like this:  First, tap the equity line on your existing home for the downpayment you don’t have.  Then get some version of an easy-qual, pre-approval letter at a low, low teaser rate. Go out looking in a marketplace where everyone else just like you is going crazy trading places. New choices are popping up everyday.  Pick one. Then try to wedge your way into the front of the multiple-offer queue –somewhere north of asking price.  No need to worry about the appraisal.  Praise the Lord. They all appraise.

From there you buy as-is. Close in 30 days.  Take your time moving.  Own two houses and pay two mortgages for a few months.  And then….best of all…. sell your old house for even more money – because the market has continued to shoot up the whole time!

Until it didn’t.  And if you happened to be one of the last ones standing in the musical chair monopoly game – you  were suddenly stuck with two mortgages you couldn’t afford and one lifestyle completely engulfed.  And you understood in painful, inescapable fashion why it had always been conventional wisdom to sell first and then buy second.

Next week:   CO-dependent Real Estate confronts the paradoxical quality in human beings that refuses to let go of the past in hopes of knowing exactly where the future is.

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Diving Into the Dilemma

Sigh. The ubiquitous “contingent” offer. Used to be relatively standard fare in real estate. Not quite a bonafide staple but certainly a recognizable cog in the machinations of the marketplace of yore – now dispersed into the hither and yon.

 

Is there any aspect of our current market more loaded with what-ifs than a contingent offer? More fraught with peril? More centrally located on the receiving line of extreme fear and loathing?

 

Yeah I know. Contingent offer? All offers are contingent on something aren’t they? Some little ‘catch’ that robs them of their ability to bestow complete and utter certainty from day one of a 30 or 45 day escrow.

 

There are always inspection contingencies aren’t there? Finance contingencies? Appraisals? And of course that huge shadowy black hole of uncertainty we refer to as ‘buyers remorse.’ The euphemism we use for a thousand different feelings or weak links in the chain of life events that can easy suck an escrow into a cascade of gravitational demise that takes about a New York nano-second.

 

Let’s face it…if someone truly wants to get out of an escrow during their “investigation” period – for whatever reason – they can always claim they don’t like the school district. Or they didn’t realize the bus line was so far away. Or the freeway noise is too loud. Or there is a rental house right next door. Not to mention the fact that they found one termite too many and the tipping point was reached. Excuses to bail? Let me count the ways. There’s a million of them.

 

That’s life. That’s real estate. Hope and wish all we want. Cry and scream and hold our breaths until we turn blue. There are never going to be any completely “sure” things. There’s always a 5,000 pound gorilla sitting smack dab in the middle of everyone’s escrow. Get used to it, if you aren’t already.

 

But a “contingent offer” in the vernacular of most Agents refers to the granddaddy of all contingencies. The Big Kahuna. If there are all those normal “catches” in a standard escrow, this is the one more aptly thought of as Catch #22. The catch that transforms a $5,000 gorilla into an existential $500,000 beast. Almost everyone knows it by some nasty name. It’s that excruciating “thing” where someone has to sell a property first in order to buy another.

 

Sound familiar? Some of you have been thinking about moving for quite awhile. But you keep talking yourself out of it because you can’t quite figure out how to do it in a way that makes sense.

 

Whaddaya do first? Go find the house you want to buy and then put your house on the market? Or sell your current house without actually knowing where you are going to go? The more you get into the mind-games associated with either of those scenarios, the more screwy it gets. And the more screwed you feel.

 

Some of you are active buyers with your houses on the market too and you’ve already been shot down trying to make offers on short sales or bank-owned properties that refuse to even look at your terminally-flawed offerings. It feels like you went to the open house and some strange corporate poltergeist slammed the door shut in your face.

 

Some of you have already experienced the rolling of eyes and “You gotta be kidding” look of a dismissive listing agent when you mentioned you had to sell your house in order to buy their listing.

 

Some of you “organic” sellers have already turned up your noses at offers from your kindred soulmates – “organic” buyers – because you weren’t willing to take a chance they would actually be able to sell their house. It’s ok for you to be one of them. But it’s not ok for them to be one of you. Afterall, this is you we’re talking about. Right?

 

No matter which perspective you come from, contingency offers are brain-twisters. Conundrums. They are like one of those Bamboo Finger Torture Puzzles we had as kids. The more you struggle against both ends the tighter things get. The more trapped you feel. The more trapped you feel, the more you squirm.

 

How do you sell in this market? How do you buy in this market? How do you do both? The market feels stuck and how can earnest individuals get unstuck without having to gnaw off one of the legs of their own transition?

 

That’s the real estate dilemma we’ll dive into over the next few weeks.

 

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Coming to a Fork in the Maze

Excuse all the cognitive scatter mixed with the chatter. Just more of my epistemological ramblings as we take another leisurely stroll through the garden of forking paths. That maze of the alternate realities unfolding in people’s lives as their choice of directions in the realty world are played out.

 

These days we tend to think of the twin acts of buying and selling a home as separate processes. Ones that are growing increasingly distinct and divorced from each other. Moving in opposite directions – rather than further along on a healthy continuum.

 

This is a huge shift. It wasn’t always the case in other markets and other times.

Remember when we actually had a robust move-up market? Or more of a consciously driven move-down market?

 

Yeah, it’s true. There were actually lots of people who bought and sold simultaneously or with only a slight delay, as a natural function of an “organic” marketplace. Buying and Selling. The two were inexorably joined at the hip. There was an intrinsic belief in a positive future just as there were people who chose to scale down because they wanted to – not because they had to.

 

The fact that so many of today’s sales have a distress component attached to them – REO’s, Short Sales and all the other varietals of Pre-Foreclosure along the spectrum – means there are no “second legs” to these transactions. One and done. These sellers aren’t going to be buying another place anytime soon.

 

Instead they’re joining the lost tribe of tenants in lieu of a deed. A separate reality lodged in a parallel dimension of rental property that exists one street over on the other side of the track. It’s a sad, counter-cyclical irony that rents are rising exorbitantly even as sales prices continue to plunge and plumb the depths.

 

And even while the ranks of the renters are swelling that demand, many of today’s would-be buyers are first timers – trying to leverage their way out. Leave their rental lives and lifestyles behind. But there is no precipitating sale on the front end to lend escape velocity to their quantum leap. And there are far fewer lenders willing to lend launch fuel to their efforts as well.

 

A good percentage of other purchases these days are coming from all cash buyers. Those who don’t have to sell anything in particular to buy something. Investors, speculators, collectors, second home beach buyers – most looking to capitalize on the market through the use of their capital.

 

Nothing wrong with this of course – except that the market could use the additional sales that often used to accompany these kinds of buys. How many 1031 Exchanges do we see happening now? Where has the ubiquitous ‘Starker’ disappeared to in this increasingly stark marketplace of ours? When more buyers/sellers were trading up, down, over, under, sideways through the market there were alot more transactions to go around.

 

Real estate was fluid. It flowed both ways in resonant wavelengths. Back and forth. Buying and selling. Selling and buying. Together they filled up the economy.

 

I get the feeling that half of the Country is waiting for housing to lead the economy out of the wilderness and back to the promised land. While the other half is waiting for jobs and productivity to ramp up and provide the kind of traction that will allow the housing market to recover and follow in its wake. Are we the chicken or the egg? The stimulat(or) or the stimulat(ee)? Now that word “stimulus” is off limits at the White House.

 

Will real estate lead? Follow? Or just stay the hell out of the way on some forgotten cul de sac? What would a giant contingency offer look like? One that we could all buy into? One that the economy could make to the economy and have the economy find acceptable? One that would sound attractive to us as both constituent buyers and sellers? One that would encourage more of us to become one and the same again?

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Humoring Myself

Recently a colleague asked: “How can you still have a sense of humor? “ My response? “How can a Realtor not have a sense of humor these days?” It’s the only kind of sense that makes any sense.

I could spend all day everyday trying to find a home for my anger and never succeed.

Or I could keep adding to the litany of lame excuses limping around out there: The market ruined my home-work. The bad economy ate my listing. It’s not my fault – it’s the default’s fault.

Or I could try in vain to harness one of those four horses of the apocalypse grazing in wait out in those endless fields of golden fodder. Ride out each day tilting at all the vacant windmills. Try to arouse the sleeping erogenous zones of a marketplace gone numb.

But those are just stories. Narratives we make up to foster the belief that there really is a definitive map that leads from our abstraction of the past to our illusion of the future – without ever having to pass through the here and now.

I prefer an obscure phrase coined by some nameless functionary during the Chinese Cultural Revolution: “We wash our hands everyday – why not our brains?” Each night I grab a bar of lava soap before going to bed and I scrub away whatever layers of housing distress have glommed onto my thoughts like a swarm of psychic cooties. I fall asleep dreaming of new paradigms where the American Dream can venture to find a home.

In my waking life, I’ve embraced a rare disorder known as Habromania. It is defined as the morbid impulse towards good humor and a kind of insanity where someone comes to inhabit his own cheerful delusions.

That’s why I’m constantly smiling and poking fun. Musing about all the amusing little one act plays embedded in real estate.

Mortgage does mean “Death-Tax” afterall.

I received an e mail flyer this week from another agent promoting her new listing. The limitations of spell check were on full display. One of the amenities prominently featured was the home’s Charming “Medication” Garden. Ooops! Hopefully the Seller has a sense of humor, I’m pretty sure it was meant to say something else.

And I was laughing about the time I came across a flyer for a home that just didn’t have a whole lot going for it. The Agent, either under pressure from its proud owner or through sheer desperation of not being able to find enough good things to say, touted the home’s Custom Toilet Seat – apparently hand-carved from first growth redwood.

Good thing we have those new low-flow toilet requirements. They give more new buyers a chance to ‘customize’ their own. A Deed in Loo as it were, rather than a Deed in Lieu.

One of the funniest promotions I ever saw was for a home set along the river on Hwy 9. On the corner sign, just above the brochure box where looky-loos go to get their real estate fixes, there was one of those framed Billy Bass Plaques. Whenever someone leaned out of their car to grab a flyer (Hey those color ones cost a buck a piece!), the battery operated sensor was triggered and the fish turned towards them singing Take Me to the River in the voice of Al Green. Not sure it sold the house but it sure surprised a lot of nosey-neighbors.

And there is no truth the rumor that a wave of Pre-Foreclosure Garage Sales has swept Craigslist recently. Real garage sales. Angry Sellers running ads and literally selling off pieces of their garages to anyone who shows up with a couple of bucks and a sledgehammer to strip them down to bricks and mortar and haul them away. Although Bank of America did announce that it plans on tearing down thousands of foreclosures in the Cleveland area and they are willing to pay $7,500 a shot to the wrecking ball operators. That’s one way to reduce the shadow inventory.

Ever watch from a distance while a Realtor armed with his high-tech badge of cool in the form of a wireless headset conducts business? Talking to the air in animated fashion? Gesticulating wildly like a Tourettes patient? It occurred to me that we could take up a collection of old Plantronic devices and hand them out to street people who have staked out particular street corners downtown. They’ll just blend in. Everyone will think they are trying to find a home for someone else. Or else railing about their lives and misfortunes at the hands of the marketplace.

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