Price Wars: Utopia

Brad Inman did it again.

I have a lot of regard for Brad as a journalist and inquisitive individual. I often don't agree with his sentiments, especially in regards to limited service versus full service (Glen Kelmann and his Redfin boys and girls are smart and they have a good business model but they are not consumer-messiahs as Brad tends to treat them). Yet his posts and my posts have tracked very similarly this last week culminating in TODAY'S POST.

If you read this and your a REALTOR, you might quibble. But if you're a consumer (who the REALTOR serves afterall and should really be working for the benefit of), you probably read this with full-force agreement.

I was speaking with my friend Morgan Saturday night and between us, we know 6 people who actually own their home. Since I work in the business of selling and buying homes, you might think that after 300 transactions, that number might be a little higher. It isn't. I have had five cash buyers in nine years of practicing real estate. All the other transactions were financed with loans. I have never had a listing receive a cash offer. Ever. Maybe some of them got paid off later. But when they bought, they always bought with someone else's money.
Morgan asked exactly the same question Saturday night Brad Inman asks today: if a bank has a loan on our house, who really owns the house? Well the Greek tells us that one is the Mortgage. The other is the Mortgagee. One has something to put to death (mort coming from the same root as mortuary, mortician, etc., meaning "to put to death"). The other has to do the business of putting it to death. Who is putting who to death when 100% loans are concerned is less a question and more a reality. There isn't much philosophy or perspective can do to change that appearance. It is fact.

What's this whole mess built on?

Now, let's go to the contract I wrote today:
Past clients.
Own a home downtown.
Have assets (as in savings, stocks, bonds, securities, those things that create wealth).
Keeping the original home as a rental property.

I handed her my "Give your Child a Chance Flyer: and asked her four questions:
Do you own your own home? (I sold it to her 5 years ago)
Has it been a good investment? (it has increased in value 45%)
What if it was free and clear?
What if you owned ten of them?

All of a sudden, you own ten, free-and-clear houses, and the game is very, very different.

I have a friend in Greeley, CO. In the last four years, the average sales price has dropped 20% in his market. The 100% financed buyers have been slayed. The "investors" have been destroyed. Not Nate. He kept buying. Why?

He bought on 15 year loans. He's paid off most of his properties. He owns 14 of them. Last year his rental income was more than his real estate income. Nate's the bank. And Nate's the bank with actual cash in the vault. While everyone else is worried about the value of their home being worth less than what they paid for it... he's increased rents 25% in the last 18 months because no one can buy anymore. Since he owns them outright... a 25% increase is total profit.