A few months back, my girlfriend Heidi and I made the decision to buy a house. Though our apartment was comfy and wonderfully located in St. Pete's Old Northeast neighborhood, it seemed far smaller then when we moved in. Plus, news reports indicated that home values were in a free fall and banks were just giving away real estate to anyone with a pulse and a credit rating that could pass muster.
I have good credit and a heartbeat! I thought.
Sure, I'd never house-hunted before. But I had watched my parents and younger brother do it. I could build on my observations and start the search a confident and savvy consumer navigating a troubled market.
I had a lot to learn.
Lesson #1: If I love it, I can't possibly afford it. My home search had its genesis on long dog walks through beautiful Old Northeast. After seeing three-dozen houses for sale in a 5-block radius, my mind began playing tricks on me. I'd see a house and think, That one over there, it's smallish and needs some TLC, and it's next to an apartment building, and I think I just saw someone throw a hypodermic needle in the bushes. I bet I can afford that! A phone call later, the asking price would turn out to be $150,000 above my price range. Thus emerged a pattern: If the house were anywhere near where I wanted to live and looked like humans might be capable of surviving within its walls, I was out of luck. If it looked like it had been trucked in from Sadr City, I could move in tomorrow.
Lesson #2: The whole game right now is short sales, and few people really know how they work. Many of the houses we're looking at are "short sales," which means the house is headed for foreclosure but the creditors are willing to cut a deal. If it can be worked out that the sale price of the house be adequately split between the creditors to satisfy all debts, the bank will sell the house at what amounts to a discount for the buyer. My Realtor, 2007 Best of the Bay winner Randy Clunn, showed us his training manual on short sales. The publication date was in April — of this year! Anything that new will likely have some kinks needing to be worked out. To date, I've only heard of one successful non-Randy purchase of a short sale, and that guy paid $5,000 over the asking price.
Lesson #3: House hunting can be dangerous and awkward. The first house we looked at, Realtor Randy had a note saying there were dogs in the house, but they would be in cages. Upon arrival, it quickly became obvious that the dogs were not in cages. In fact, they were attempting to claw their way through the door for an impromptu meeting with some appetizing strangers. After about 10 minutes of Randy calling the guy's cellphone, the owner of the house (who had been in the shower) realized he had people outside, caged the animals and let us in. As we wandered through the well-decorated but poorly laid-out house, the owner (still toweling off) did his best to pay no attention while spying on us at every opportunity. It's much harder to publicly announce, "This bathroom looks like the kill floor at a slaughterhouse!" when the butcher is peeking around the corner.
Lesson #4: The market is still looking for a bottom. My overriding gut reaction after two months of scanning through listings online and visiting properties is that no one really knows what anything is worth, and that makes closing a deal tough. I looked into one condo, a nice unit built in 2002 on the fringes of Old Northeast. The original sale price was $299,000; the current owner (who is not local and is headed for foreclosure) is asking $450,000. I'd pay $180,000. Until sellers (like him) stop clinging to the entirely fictional valuations from the height of the bubble, and buyers (like me) stop expecting everything to be down 80 percent from those inflated levels, nothing is going to improve. I'm sure equilibrium will return to the real estate market one day. I just don't think it's going to happen this year.
Lesson #5: "There are a lot of moving parts to real estate." This is Realtor Randy's favorite phrase. In a short sale, the "moving parts" are the creditors, the bank, the seller and the buyer. In other cases, it's complicated financing or multiparty deals. Like anything with a lot of moving parts, you need lubrication to get anything done. I recommend vodka tonics.
Lesson #6: You're supposed to get married first. Upon hearing of our search, friends and family usually ask Heidi and I why we aren't getting married first. Apparently, that's the way it's "supposed" to be done. "Oh, we've thought about it," I tell people. "But when faced with choosing between merging our dual existences into a complete whole that satisfies us intellectually, emotionally and spiritually for the rest of our natural lives or finding a house in this real estate market, we decided to knock out the harder one first."
Joe Bardi is the associate editor of this newspaper. He still hasn't found a house.
This article appears in Jul 30 – Aug 5, 2008.