Check out this article on ABCNews about Treasury Secretary Tim Geithner and his inability to sell his home. Most people probably just read this article and try to make some joke about how Tim Geithner is running our nations treasury but he can't even sell his home. But I think by doing that a lot of people miss a valuable lesson in home buying.
After leaving the tony New York City suburb of Mamaroneck to take his new post in Washington, D.C., Geithner put his five-bedroom Tudor home on the market for $1.635 million.
That was in February. By May, he cut the price $60,000 but still got no takers. A few weeks later, May 21, the home in New York's Westchester County was reportedly rented for $7,500 a month.
"Mr. Geithner's house is a textbook example of what is happening in the market here," said Leah Caro, president of Bronxville-Ley Real Estate and president of the Westchester Board of Realtors. "Many sellers are bringing their houses on [the market], finding that they don't have a buyer for it, making price adjustments in hope of luring a buyer into the marketplace. In the case of Mr. Geithner, he had to move. And renting was his best option."
That valuable lesson is that when it comes to real estate it is a lot easier to make a poor market decision than a poor overall decision. I love real estate and the benefits it has to offer, even in times like these. In fact I am in a very similar situation to Mr. Geithner. I just found some tenants for my condo, as I will be moving to Boston come this weekend. There are many people who would have sold and either taken a huge loss on the sale price or tried to command more than the market is willing to pay and would have lost money with the property sitting vacant. Geithner and I decided that renting was the best option for us. He likely paid someone to take care of it for him. I on the other hand have been working my ass off alongside my partner in crime to get my place rented out for the last two months (read here). People ask me if I regret buying and I have to say I really don't Yeah the last two months have been a stressful hell, but the learning experience has been priceless. I must say as I sit here on my air mattress in the living room with my computer set up on a makeshift desk of boxes, touch up paint still drying on the wall, I am extremely fulfilled with what Heidi and I have accomplished. I am not naive enough to think that everyone should own property and everyone should be a do it yourself landlord: to each his own. But for me it was a great decision, even with my Timothy Geithner like situation. More to come on my landlording lessons learned soon. I really liked the following passage because I think it illustrates the inherent flaw in peoples hindsight way of thinking.
"I don't think anybody is in a position to say that he overpaid, or anybody overpaid, when he bought his house because market value is market value," Stiefvater said. "Back in the those days, everybody was overbidding -- I'm not saying overpaying, but overbidding -- and getting into bidding wars and multiple offers escalated the sale prices to what I think was higher than market value."
At the time everyone makes the decision that they think is the best decision. If you get down the road a bit further and it turns out you were 'wrong' then just change your way of thinking now and adapt and overcome. If that means taking a loss on rent while the market recovers so be it. You are still getting a write off, depreciation expenses, someone else paying your mortgage and building your equity. Not to mention priceless experience. More to come on my landlording journey...I promise.