Bass Ackwards

• September 28, 2010
• 17 notes

The knee jerk reactions of our government in the wake of the 2008 “mortagage meltdown” have screwed me over in just about every way possible.

They start a first time home buyer tax credit, but I don’t qualify because I responsibly bought a condo that I could afford in 2006 (a year before Liz and I got married). Then they start a program for move-up buyers, exactly what Liz and I were hoping to do, but the condo purchase was too recent for us to qualify.

Fine, we don’t need a damned government handout (even though it’s been artificially propping up the market), I bought a great condo in thriving San Marcos (a college town with a growing student body and low vacancy rates) and poured my blood, sweat, and tears (and $10k) into remodeling it.  Surely we had built some good equity and could use it as a downpayment on a home for our growing family.

So, we tried to sell the condo. We received several offers before the condo was even listed in the local MLS and accepted a full price offer within days. Awesome, we’d have more than enough money for a downpayment to build a home on an amazing infill lot we found just 1.5 miles from downtown.

Just kidding…  the condo didn’t appraise and the sale fell apart just days AFTER we had moved into a temporary apartment.

Turns out, appraisers are scared. In the wake of the mortgage meltdown, appraisers were one of the groups [rightly] singled out for being willing co-conspriators in the whole mess. So they’ve been handed all sorts of new, hastily drafted regulations and live in fear of loosing their license and therefore their livelihood.

But at the end of the day, the job of an appraiser is to determine fair market value for a property. And what’s the most definitive measure of the market value of something? Multiple willing and able buyers, which we had!  But by the time everything was sorted out, the buyers had moved on. The parents and investors who buy condos in San Marcos want to have everything lined up with ample time for students to move in before school starts in late August.

OK, fine… we don’t need to sell the damned condo, we’ll become landlords and scrape together the downpayment on our own. Well, it took us 2 months of paying rent at the apartment and mortgage on the vacant condo before we found a tenant. With the bleeding stopped and the condo now generating a positive cash flow, we turned our focus back on building a home.

Guess what? It didn’t appraise.

So, you know how our government is throwing all sorts of money at energy efficiency, alternative energy, and the like, while also trying to stimulate the housing market through giveaways and ridiculously low interest rates? Well, it’s all bass ackwards—as are most things in Washington. Turns out, the same scared appraisers who couldn’t appropriately appraise my condo also can’t (or maybe just don’t) give much value to improvements in energy efficiency and quality of construction.

In the several month process of working with our builder to plan the home, we did tons of research and made most decisions based on value and long term durability. That meant we chose mid grade (not luxury brands like Viking and Kohler) fixtures, appliances, and things like strand woven bamboo flooring that were well regarded by Consumer Reports and the like.

We also decided that increasing the energy efficiency of our home was the most responsible and long term cost effective thing we could do (and would be cost prohibitively expensive to change after the home was built).  So, we went with self sealing Zip System sheathing (with built in radiant barrier), hardie board siding, foam insulation in the attic, Optima blown-in insulation in the exterior walls, a 16 SEER AC (2 stage, zoned system with variable speed fan), low-e vinyl windows, etc.

But, the appraiser compared our construction plans with existing, poorly constructed tract homes that cost their owners twice as much to heat and cool while falling apart before their very eyes.

So, what have I learned through all of this?

1. Don’t buy anything of consequence unless the government is handing out money to do so, or somehow subsidizes the construction, manufacturing, or other aspect of the cost (like a subsidy in the cost of borrowing money). Depending on what you plan to buy, this will likely happen in 10-20 year cycles, but for many things it’s perpetual.

2. Don’t count your chickens before they hatch. You just never know when some random government regulation will wipe out those nest eggs, artificially depress the market for chickens, or tax the sale of chickens such that you no longer profit from the chickens having hatched.

3. Don’t bother doing anything of consequence if there are government regulations involved. If you build it, they will come and tear it down for not meeting some obscure regulation written by some random lobbyist.

So, instead of working on my business today as I should have been (you know, creating value and helping to grow the economy), I spent most of the day writing a letter to an appraiser practically begging him (while also providing as much solid documentation as possible) to increase the appraised value so that we can build our home.

Wish me luck, I’m gonna need it.