Things could be worse. Instead of 2012 it could be 2006. The benefits of 2006 are obvious. We’d all be younger, which isn’t to be ageist but it is to admit that even the oldest among us wouldn’t mind being six years younger. I’d love to be six years younger. And if it were still 2006, that would be the case. I’d have a ticking time bomb in my lower back, but it’s better for that bomb to be silently ticking than for it to have been detonated. So again, advantage 2006. The problem with 2006 is one of real estate, and when viewing real estate then from now, we can see clearly that what we have now is something that we lacked then. We had no perspective. Without perspective it was almost impossible to find the one thing that we’re hunting for each and every day: Value.
It wasn’t that we didn’t want to find value then, it’s just that we didn’t always know what it looked like. Our vision was obscured by the speed that we were traveling. Our real estate worlds were engineered to search and destroy, and we had to do this quickly. It’s like hunting, I imagine. I’ve never been. But I’ve seen people sitting in trees wearing orange and I assume that they are hunting. If they aren’t, I recommend staying far away from such people. But if they are hunting, as we were then, it would be like watching deer race across our paths at 120 miles per hour. We could see that they were deer, and we could shoot, but a win then was to hit the deer and drop it. Once we did that we’d walk closer to see what we had just captured. Big or small, all we wanted in 2006 was something.
Today we can trophy hunt. We don’t need to shoot at anything that races past. Today, the deer walk more than they run, and our scopes are better, or aim truer, and our goal not just something with brown fur and a white tail, but something large and something worthy of a shot. Today, we’re looking for value and it’s so much easier to find because of what we went through in 2006. It’s value first, value forever.
To some surprise, price isn’t the only driver of value. It’s the most obvious, but it isn’t the only thing. I can pay list price for a property and still achieve value. Really, I can. In early 2011, a lakefront came to market in Buena Vista. I had a customer call me, thankfully, and we made a bid on it. Unfortunately, perhaps five other customers called their brokers and make bids as well. This was a bidding war, and so when my customer was chosen as the buyer after a counter increased our original offer to full price, was that full price bid still value minded? Was it something lasting or just something that we won because we paid more and presented the most pristine offer? Can value be found in paying full price?
In this case, yes. When five people want to buy something, it’s the most apparent sign of desirability I can think of. It’s full price, yes, but when value is the goal we have to remember that long term desirability is just as important as momentary pricing. The goal isn’t just to figure out what the property is worth today and then buy it for less than that price, the goal is to buy something of lasting value that will be desirable to the broader market not just on the day we bought it but on the day we decide to sell it. Oh, and for all the well intentioned thoughts of keeping properties in perpetuity, our lives have changed. We have very little of the generational mindset that our parents and grandparents had. We buy properties and then we sell them. The winners make money, the losers do not.
If I buy a property next to a busy boat launch, but I pay less for it than others have paid for lesser frontage elsewhere, have I secured value? If I buy the cheapest house on the lake, next to this launch, and I pay much less than the already low asking price, have I somehow found value? Um, no. What I’ve found is a property that will forever be hampered by the one thing that I cannot change- the location.
I intend to win the lottery on Wednesday evening. It’s going to be exciting for me, disappointing for everyone else. When I win that lottery, I will break the one rule that lottery winners everywhere subscribe to. I will be quitting my job. I’m not even going to pretend otherwise. It’s so nice when people win and then they say that they’re going to keep their jobs. So sweet. And then they say that they’re going to buy their mom a house and pay off their kids car loans. I plan on quitting my job, buying several million dollars worth of depreciating consumables, and then going house hunting. As I scan the lakefront today, there are all sorts of properties available, but only one that I’d buy with my large lottery money. I’d find my way to Snake Road and then I’d buy the lakefront listed for $4.2MM with 9 acres, and I’d buy my listing right next door. I’d then have around 220′ of frontage and around 11 acres. I’d have estate land, and then I’d build a house on that land and I’d be pleased in knowing that I broke another lottery winner rule- I’d have secured actual value.
Lottery musings aside, it’s very late November. It’s time to go hunting. Value is out there, but it isn’t as obvious as most need it to be. It’s out there, lurking, hiding in the shadows and waiting. The sellers that hold these value propositions might find a little extra motivation to deal with a 2012 closing date, considering the potential tax tsunami threatening their capital gains. I’ll around all this next month, waiting to help. Get used to seeing this: Value First. Value Forever. I think I’m going to make a wild pitch to buyers that value is a good thing, even better than platitudes and marketing gimmicks. We’ll see if they agree.