A while back, I vented on the complete ridiculousness that is "My House Is Worth What?" on HGTV.
Well, what do you know...Newsweek columnist Daniel McGinn recently used the show as an lead-in to a very good article about the changing nature of property appraisals and the real estate downturn in general.
As the real estate market continues to look gloomier, I couldn't help but rehash the most obnoxious, disturbing, and yet telling exchange I've seen in a while involving an ignorant person's perception of how real estate "investing" works versus reality. An edited piece of the original post appears below. To see the whole thing, click on the link in the first paragraph.
Essentially, in "My House Is Worth What?" a RE agent takes a look at a person's house, points out some pluses and minuses, and then tells them what they would list it for.
Positive factors the RE agent finds about this particular homeowner's property, located somewhere in LA: There is a guest house on the property that she renovated and is renting out. There's also an outdoor patio that would be good for entertaining (is it just me or is that feature very overrated - sure, we would like some nice outdoor space, but just how often do we really use it?)
Minuses: No air conditioning. Washer and dryer literally within arm's reach of the sink in the kitchen, out in plain sight. Kitchen needs major work and has awful looking cabinets and counters. Floors in the kitchen should probably go, too.
She paid $550,000, and spent $25,000 renovating. So, she's in for $575,000 but is hoping it's "worth" about $775,000 - so that way, she says, she could have a big enough down payment to trade up for a bigger and better place. This doesn't pass the smell test, and you can tell the real estate agent sensed it too - $200,000 appreciation in two years, considering we're now in a major buyer's market? (Note: This was a number of months ago. Things obviously have only gotten worse since then)
The agent, confused, asks her: "How did you arrive at that figure?" (What he really means: What the @#$* are you thinking?)
Her answer: "Well, I've lived here for two years, and I heard you just add on $100,000 a year kind of thing..."
Excuse me while I hurl. This is a prime example of complete ridiculousity at work. That statement concisely sums up why we're in the situation we are now. People have been conned to believe that you can't go wrong with real estate, it always appreciates, blah, blah blah. This is one piece of the explanation as to why prices are now through the roof.
Cue the agent's nervous laugh, and joke about "Well, this is LA, right..." (What he really means: "You nut case! How can you possibly think that your house went up $100,000 each year? Good luck finding a buyer.")
He proceeds to tell her he would list it for $669,000 - still a whopping $94,000 above her costs (and she'd better try to get out now, otherwise she could be in for a surprise as the market continues its downward swing).
Despite what is in actuality very good fortune (and luck) for her, she pouts as we fade to commercial.
Well, what do you know...Newsweek columnist Daniel McGinn recently used the show as an lead-in to a very good article about the changing nature of property appraisals and the real estate downturn in general.
As the real estate market continues to look gloomier, I couldn't help but rehash the most obnoxious, disturbing, and yet telling exchange I've seen in a while involving an ignorant person's perception of how real estate "investing" works versus reality. An edited piece of the original post appears below. To see the whole thing, click on the link in the first paragraph.
Essentially, in "My House Is Worth What?" a RE agent takes a look at a person's house, points out some pluses and minuses, and then tells them what they would list it for.
Positive factors the RE agent finds about this particular homeowner's property, located somewhere in LA: There is a guest house on the property that she renovated and is renting out. There's also an outdoor patio that would be good for entertaining (is it just me or is that feature very overrated - sure, we would like some nice outdoor space, but just how often do we really use it?)
Minuses: No air conditioning. Washer and dryer literally within arm's reach of the sink in the kitchen, out in plain sight. Kitchen needs major work and has awful looking cabinets and counters. Floors in the kitchen should probably go, too.
She paid $550,000, and spent $25,000 renovating. So, she's in for $575,000 but is hoping it's "worth" about $775,000 - so that way, she says, she could have a big enough down payment to trade up for a bigger and better place. This doesn't pass the smell test, and you can tell the real estate agent sensed it too - $200,000 appreciation in two years, considering we're now in a major buyer's market? (Note: This was a number of months ago. Things obviously have only gotten worse since then)
The agent, confused, asks her: "How did you arrive at that figure?" (What he really means: What the @#$* are you thinking?)
Her answer: "Well, I've lived here for two years, and I heard you just add on $100,000 a year kind of thing..."
Excuse me while I hurl. This is a prime example of complete ridiculousity at work. That statement concisely sums up why we're in the situation we are now. People have been conned to believe that you can't go wrong with real estate, it always appreciates, blah, blah blah. This is one piece of the explanation as to why prices are now through the roof.
Cue the agent's nervous laugh, and joke about "Well, this is LA, right..." (What he really means: "You nut case! How can you possibly think that your house went up $100,000 each year? Good luck finding a buyer.")
He proceeds to tell her he would list it for $669,000 - still a whopping $94,000 above her costs (and she'd better try to get out now, otherwise she could be in for a surprise as the market continues its downward swing).
Despite what is in actuality very good fortune (and luck) for her, she pouts as we fade to commercial.
Oh, what I wouldn't give to see where she's at these days. Was she actually able to convince a greater fool to take this place off her hands? Did she then "trade up" to an even bigger, more expensive house with an equally large mortgage?
They should start doing follow ups with some of the more ridiculous people they've had on the show to see how their incredibly lame brained plans panned out (like the couple who wanted to pull all the equity out of their townhouse to buy themselves an over-the-top wedding they shouldn't possibly afford).
Only problem is, it would probably be way too realistic and depressing. And that, folks, is not good TV.
They should start doing follow ups with some of the more ridiculous people they've had on the show to see how their incredibly lame brained plans panned out (like the couple who wanted to pull all the equity out of their townhouse to buy themselves an over-the-top wedding they shouldn't possibly afford).
Only problem is, it would probably be way too realistic and depressing. And that, folks, is not good TV.
4 comments:
New title for the show:
My House Is Worth Squat.
That should sum things up quite nicely.
Perfect.
I think the title can stay, but with a slight modification:
My House is Worth What? Part 2, the Decline.
Here is the show's pilot:
www.youtube.com/watch?v=WgqSd3-nBFU
I keep tabs on this property, because if she actually pulled the trigger on the HELOC and repairs, I figure she'll lose the house.
Tyrone,
Thanks for the link. And you're absolutely right - the show is going to have to change things up a bit. Your title works well for me, too.
I had wondered how things would play out, considering they were still making new episodes as the RE market turned. I was pleasantly surprised to see most agents were fairly honest about the market. It was the sellers who were out of their minds in denial.
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