From SonnyPage on the FOOL......
"That will be thirteen dollars, please"
Many of you know that my wife and I are realtors. We live and work in the north Atlanta suburbs of Roswell and Alpharetta. Last Friday was a closing day. One of our buyers was under contract, so, at 10 a.m., there we were, at M...., R...., P...., and C...., our preferred closing attorney firm, and with J...., our favorite attorney, at the head of the table. My buyers and I, along with Brian, our mortgage lender, were on one side of the table, and across from us the sellers and their realtor. Closings are generally happy affairs with light hearted banter back and forth as the attorney goes through the HUD-1 settlement statement. Not so this time....this time, the seller was bringing a check to the closing table as well as the buyer. We had suspected from the contract signing that this might be a stress sale, and here was proof. The HUD-1 showed the sellers with a net of minus $1000 or so; but then another unpleasant surprise. The title search had uncovered a tax lien that they had thought had been resolved. Only another $1000 or so, but the seller wife, visibly upset, had to leave the room for a few minutes. These sellers were "downscaling", moving into a less expensive, smaller condo. But the main attraction, the builder was offering some incredible package to get the units sold. They would not need a dime to make the move. Somehow, we made it through the closing, shook hands, and Brian and I made our way out with our buyers. The buyer husband then noticed that he had left his knapsack inside, Brian offered to run back in to get it and did. We invited our buyers to join us for lunch at the Thai Thai, our favorite restaurant, but they had already made plans to join their daughter across town. At the Thai Thai, after we had ordered, Brian told me what had happened when he ran back into the attorney's conference room. The seller wife was crying, the husband was shouting, the attorney was trying to calm them down. Not a happy scene.
We all know that the flood of liquidity has caused real estate prices, in general, to rise. Most of us also know that many Americans, under financial stress from unemployment, or underemployment, or just the ridiculous ease with which a loan can be obtained, have "cashed out" on the way up. These particular sellers, I absolutely assure you, are not alone in having little or no equity in their homes. If any event or events were to cause home prices to slide there will be a "snowball" effect; it could get very bad very quickly. Foreclosures....prices fall...triggers more foreclosures...and so on. The Fed has a big stake in keeping this particular bubble well inflated.
And a final note. My wife had me stop on the way home for eggs, milk, a couple of other things. I do try to get the best price, store brands when possible, but I could not tell you what eggs cost a year ago, it's just not something I pay attention to. On the other hand, the haircut place I have used forever, as long as I can remember, has always charged twelve dollars. I dropped in for a cut today, it's next door to the grocery. "That will be thirteen dollars, please".
sonnypage |
