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Sorry for the long delay in posting. To answer the question many of you—OK, several of you—have been asking: No, we haven’t yet bought a house. We almost did. (This one, if you’re interested. And this one was also tempting.) And we’re getting closer. But we remain renters.
Part of the issue, obviously, is that we haven’t found a place we’ve both liked enough to want to spend most of our life savings on. But part of the issue is also, I admit, a lack of urgency (mostly on my part).
(On mine, too. I’m happy with our apartment, our neighbors, our friends here. I like apartment living—being able to leave our door open and run down the hall to feed our neighbor’s fish or have that very same neighbor watch Joe while I’m running home from work. So what if the people upstairs use their exercise machine at 9 p.m.?—Nora)
Note I did not say a lack of desire: We’d like a bigger place, and will need one, and it makes sense for us, at this point in our lives, to buy. We have a pretty good idea of what we want, both in terms of house and neighborhood. We have savings. We have loan approval. We have a lawn-care catalog.
So what are we waiting for, you ask. (And if you’re a realtor, you don’t so much ask as shout it.)
A few reasons. One, prices are continuing to fall, and I don’t think we’re hurting ourselves by waiting. (Though I don’t think we’ll wait until 2010, despite this forecast.) Two, as Nora said, we like our current neighborhood, and we certainly can’t afford to buy here. But we can enjoy the sidewalks. Three, and most important, we have to find a place that all of us feel comfortable in.
(Michael, you might as well fess up: By the time we get into this place, there will be four of us.—Nora)
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When we wrote this headline, we were just kidding. But now President Obama has gone and pretty much taped an infomercial—complete with exhortations to visit his Web site—telling people what a good deal they can get if they refinance their mortgage. Low rates! Great service! Millions of satisfied customers! Actually, he didn't mention anything about great service, but since it's the federal government, you can count on it.
I'll let Dana Milbank expound on the political implications of all this. My only point is to note that the president refers to your house as "your single biggest investment," which it usually is, unless you're someone like Bernie Madoff, in which case you've got bigger problems (and more houses).
Obviously the president hasn't been spending much time lately with real-estate agents and doesn't realize that this think-of-your-house-as-an-investment line is no longer in the script. If I had a dollar for every time I've been at an open house and been told to think of it not as an investment but as a place to live—well, we'd have enough for a much bigger house. I realize that a house is not only an investment. Like a car or a box of breakfast cereal, it has a value all its own, separate from its monetary worth.
I also realize that it's the job of realtors to get people to buy houses. And in a declining market, property is not a good investment, at least for the short term. We weren't in the market a few years go—it may not seem like it, but we've been looking for only a few months!—but I imagine the sales pitch then went something like this: Don't think of this as a place as where you're going to live for the rest of your life—think of it as investment! And in a few years you can sell and move up.
Of course, neither perspective is entirely wrong. It's a matter of emphasis. Maybe buyers back in the boom years should have heard more advice like what we're hearing today. And maybe we ought to listen more when we're told not to think of a house as an investm... Nah. We should still think of our house as our biggest investment and as a place to live. Because that's exactly what it is.
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Maybe it's because of my job, maybe it's because of my upbringing, maybe it's because of my heritage, but anything or anyone described as "earnest" immediately arouses my suspicion. So when the topic of "earnest money" came up last week, I was not favorably inclined.
Earnest money is basically cash that you give to your real estate agent to show sellers how serious—excuse me, how "earnest"—you are about buying their house. Your agent then hangs on to it until the deal either closes or falls through. If it closes, it's put toward your purchase. If it falls through, you get it back. Theoretically. The law varies, but if the deal falls through for reasons not spelled out in your contract, the seller can keep your money even though you don't get the house.
There are other ways to show earnestness (the amount of your offer, the size of your down payment, a heartfelt note hand-delivered to the sellers). But, in homebuying as with wedding gifts, people generally like money. So the question, essentially, is this: How earnest a buyer are you?
With this house, I can tell you exactly: We were prepared to be 1 percent earnest. With an asking price of $638,000, this is not an insubstantial amount of earnestness. Besides, as far as I can tell—in real estate as in life!—there is no agreed-upon standard of earnestness. Sometimes earnest money is a percentage of the asking price; sometimes it's just a few hundred or thousand bucks.
But our Realtor was aghast. Our offer wouldn't be taken seriously, she said. But what about our offering price, I asked. What about our proposed down payment? What about this contract we are prepared to sign? What about this essay Michael wrote in high school about the dignity of work as portrayed in the songs of Bruce Springsteen, which he is prepared to fax to the sellers? [That essay sounds awfully earnest to me!—Nora.]
The one thing we were not prepared to do was to be 4 percent more earnest, which is what our Realtor suggested. Maybe we were wrong. And I understand that the seller wants assurance that the buyer is serious and will see the transaction through. But this argument seems to ignore the presence of a contract. If you sign an offer, which protects and obligates both parties, then what's the purpose of "earnest money"?
I'll tell you: It has no purpose. Sellers, with the encouragement of Realtors, extract it simply because they can. And because they have been working this way for decades, maybe even centuries. I wonder how much earnest money Abe Lincoln had to pay to get this place.
All this said, I concede that this position is not entirely rational. After all, if we really want the house, and if all the conditions we spell out in the contract are met, what does it matter? We can just subtract the earnest money we pay now from the down payment we plan to make later. What's a few thousand (or tens of thousands) bucks among friends (or parties to a contract)?
Well, I'm not there yet. I may have to be irrational about this for a while. Earnestly irrational.
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