Mizuno Man

By William F. Devine

April 2011

Perhaps you are old enough to remember the days when the United States had real estate markets. Perhaps you recall the times and locations where property was appreciating so fast you could day-trade it.

Things have been different for a while.

The residential market has rested on the bottom of the Mariana Trench since the day someone finally did the math on all those 145% loan-to-value mortgages. As for the commercial market, you may have noticed during recent Christmas shopping seasons that, for about the price of a pair of Barbie dolls, you could instead buy your daughter a Westin hotel or a Westfield mall. Because real estate mutated into The Lost Market, a fickle set of forces works on anyone who considers buying property these days. Interest rates remain lower than low, so if one can find a lender who will fund a loan, buying seems like a good idea. Prices remain sunk in many areas and markets, so, to capitalize before prices rise, buying seems like a good idea. Lots of property owners are gasping for financial oxygen, frantic to sell, so buying seems like a good idea. And because the economy has been so feeble, making a mistake with your money could be more costly than ever before, so beware. Those scoring at home will notice that “buying-seems-like-a-good-idea” out-points “beware” by three to one.  So what?  Just this—the crest of momentum toward closing
		The Mariana Trench. Scientists first thought they had discovered the Lost City of Atlantis 35,994 feet below sea level. After further review, it turned out to be the U.S. residential real estate market.

a deal these days multiplies in power because people think they are capitalizing on unprecedented opportunity, and sometimes it sweeps them straight into disaster.

Consider: wealthy business man feels uneasy about what his purchase contract requires and how the seller acts during escrow, doesn’t bother to spend thirty minutes and $200 with a real estate attorney getting straight advice, closes escrow, then spends 18 months, $300,000 in legal fees, and a lot of tears fighting to unload the lemon he believes he was defrauded into buying.

Or: brand-name business school business woman puts dilapidated mansion into escrow, figures she can upgrade it and make a fortune, plans to obtain loan after escrow closes, uses all her liquid net worth to close escrow, then discovers that before she can receive the building department approvals necessary to close a loan, she needs to complete upgrades that will cost $155,000 that she does not have.

The only way to avoid these market riptides and attendant disasters is to do the work of learning everything about your seller, your purchase agreement, and your property before you commit to closing escrow. The necessity of such thoroughness seems obvious, yet Estate King–whose dominion, as you can see, extends to all things estate, be they estate planning, estate administration, or estate real–observes that many people still stop running before they cross the stripe on the track below the tape that reads, “Everything.”

Where the purchase agreement requires written notice to the seller to terminate the deal, for instance, they assume a cell phone call will suffice. Where they ask why the seller is selling, they never dig further after the seller responds by reciting Falstaff’s soliloquy from Act Three of The Merry Wives   of Windsor.

Where the lender will not lend until the house has power, they call the power company and learn that the house cannot have power until the connection to the panel from the box in the street is replaced to the city’s satisfaction, but they never go to the planning department to read the file on the house, and thus never learn that the city will not approve the rebuilt electrical connection unless, at the same time, the house is rewired and the fence, roof and plumbing system are replaced.

Running all the way to “Everything” is not a Dancing with the Stars experience. It’s more like Mile 11 of the Boston Marathon in 41-degree drizzle. It takes an inquiring mind, and a willingness to drive to the planning department or the county or the property or the architect’s office yet again, to copy yet another file, or ask yet another question, or maybe ask the same question for the eighth time because the first seven answers confuse you.

So if you are in the market, dump the crocodile tassel loafers and the stilettos by Jimmy Choo. Lace up those Mizuno Wave Riders instead. Ask all the questions. Call your attorney too early, not too late. And no crying about having to make so many trips to the planning department. There’s no crying in real estate.