Flight to quality

    In yesterday's article (see immediately below), I reported that a 5-acre piece of property in the Bald Rock community in Cashiers, NC, had been foreclosed and was being offered for $249,900 by the lender.  At just a 12% discount to what other lots had sold for recently in the upscale community, that didn't seem like much of a deal.
    Carol Clay, the local realtor who has the listing, sent me a note late yesterday afternoon to say that the bank had dropped the price to $224.900.  The betting here is that won't be the last price reduction.
    The value of a piece of residential real estate is not difficult to assess. Prices are set substantially on the basis of supply and demand (and the ease with which rights to the property can be transferred from one person to another).  The current financial crisis, as well as the rippling effects of foreclosures and tight lending across the nation, with the consequent loss of many thousands of jobs, will continue to scare away buyers and drive demand and prices down.  The oversupply of units virtually everywhere, but especially in places like Orlando, Miami, Phoenix and Las Vegas, further erodes the prospects of price appreciation in the next year or two at minimum.
    Every crisis offers an opportunity for someone, although unless you have oodles of cash, it is hard to see the opportunity in the current fiscal mess, since banks are generally not lending money to anyone without stellar collateral.  The opportunity to "leverage" a bank's money to buy under-appreciated real estate is just not there.
    If you do have cash and are contemplating taking advantage of bargain prices, do a lot of homework to make sure the quality of the community you are considering is unassailable.  That means the developer, if he is still on site, has deep pockets, or that the Home Owners' Association, if it is running things, has a consistent track record of fiscal responsibility.  Make sure the promised amenities are either in place or that money is in escrow to pay for them.  Note that if a developer has dropped prices well below what others in the community paid for their lots, this probably is a sign of desperation; good developers do everything they can not to undercut their customers' property values.  Instead, look for concessions from the developer, such as upgrades or beneficial financial terms (payment for closing costs, for example).
    Finally, make sure you find yourself a real estate agent who not only can show you suitable individual homes in different golf communities but can also help you assess the relative strengths and sustainability of each.  The purchaser has all the leverage in this market, and with the right kind of help, you can find phenomenal bargains. There is an oversupply of real estate agents right now for many of the same reasons there is an oversupply of homes; you have the leverage to demand that they work hard and well in your behalf.  And if the market is any indication, they have plenty of time to devote to you.