On Borrowed Time | Advice from Julie Gardner


I spent last Wednesday afternoon at the Oakland DMV applying for a REAL ID card and California Driver’s License – the WHOLE AFTERNOON! (DMV is the great equalizer; no matter who you are, it’s gonna be a s**t show.) Even with an appointment, I waited in line behind a slew of others who, not surprisingly, had also booked their appointments weeks in advance. As my license had officially expired on my birthday in July, I spent the past six weeks hoping I wouldn’t be pulled over, driving on borrowed time. (That’s never a good thing.)

Luckily, I wasn’t stopped (although I was denied a rental vehicle) and I’ve now got a “temporary license” in my glove compartment until the new ID arrives. BTW, getting a “REAL ID” requires you to jump through more hoops than securing a home loan (well, almost) but at least now I should qualify for the “TSA PRE” line at the airport, right?

It occurs to me that DMV has changed very little in the 40+ years since I first applied for my driver’s permit at the tender age of 15 in Sacramento. Talk about a time warp; the Oakland branch looks virtually identical, the employees move at the same slow pace, pen and paper are still the preferred method of transferring information, and no one’s in a hurry to get anything done. “Next!” As with the post office, there’s no competition, thus no incentive to do anything better, smarter, or more efficiently.

In sharp contrast, the practice of Real Estate is the polar opposite of my experience with DMV. We not only need to move quickly, but we need to recalibrate as new information comes to light. Case in point, prices are beginning to decline in many sectors of the marketplace, but as the value of homes has been moving steadily UPWARDS in the Bay Area for more than a decade…

…Sellers are struggling to adjust to the fact that the tide may finally be turning.

Given the stock market volatility, the bond inversion, the trade war with China, and a looming presidential election that promises to be another 3-ring circus, is it possible that we may be in for a correction in the coming months? (It’s possible.) Will we look back at 2018-2019 as the pinnacle of our marketplace? (We might.) 

In other words, in the world of Real Estate, are some of us driving on “borrowed time?” (We could be.)

I don’t have a crystal ball, nor do I pretend to portend what’s coming down the road, but as prices have already adjusted in other high-end real estate markets around the nation, we shouldn’t assume that the real estate market only ever trends UP. 

But whether there’s a correction on the horizon – or not – for some Homeowners, the time to sell may be now, regardless of what the economy IS or ISN’T doing.

Last week, I researched a property on behalf of a dynamic young couple I represented previously on a home purchase. The house in question sits not far from their current residence and is clearly in need of much TLC, and as it so happens, my clients have already successfully navigated a stunning renovation and are ready for their next big “project.” Put two and two together and maybe, just maybe, an off-market sale becomes an elegant solution for them both . . . ?

However, when I opened up the county records for this “identified” property, I discovered a looong list of loans the owners had secured against the equity in their house. (“Equity,” is the difference between what one owes and what one nets come time to sell.) Together, these loans amounted to almost $3 million! (‘Scuse me?) Unfortunately, the house, in its maintenance-deferred condition is probably not worth a whole lot more and I’m betting (if I were a betting woman) that the owners are behind on their property taxes as well.

Keep in mind, this home was bought decades ago for less than six figures. As such, this property’s current market value should have provided a sizable “nest egg” for its owners. Instead, they’ve eaten away nearly ALL of their profit, and then some.

Why would people do that? (Good question.)

Maybe they used the equity to fund their children’s education (lots of folks do). Maybe they used it for extravagant purchases (it happens), or maybe they had unexpected medical bills or other unwelcome circumstances (that’s a tough road and I wish you a speedy recovery). 

But from where I sit, the most viable reason to take equity OUT of your home is to put value back INTO it via a renovation or other timely improvements that ultimately ADD value to the house – not diminish it.

Do not, I repeat, DO NOT borrow against your home to fund a car, buy a boat, or take a cruise. 

It’s tempting and banks would have you believe that the equity in your house is fungible and easily recaptured. It isn’t. In fact, our homes are susceptible to rising and falling values much the same as any other investment; the difference being that this is your HOME! Should you get to a place where you owe more than your property is worth, you could find yourself “upside down” and that’s carelessly criminal in the Bay Area marketplace where Real Estate has been among the safest of investments.

While the goal for many is to stay in their homes forever, the equity in them can often provide an extraordinarily well-funded retirement even if you have to pay capital gains on some of the profits. I have visited a fair number of homes that frankly, became overwhelming for the owners to maintain, which meant, they no longer did. 

Let a home fall into disrepair and that too, eats away at your valuable equity.

If this describes you, or if you’ve outgrown your home, or if you are just ready to let go and move into the next chapter of your lives, may I suggest you meet with an estate planner, CPA, or tax advisor and then sit down with the family to have a good heart-to-heart talk about whether it makes good sense (and cents) to keep your home or to sell itwhile it’s still at the peak of its earning potential. And with all due respect, the decision to sell your property or stay put should be about your goals, not your children’s goals for you, or their expectation of a large inheritance and a stepped-up basis at some future point.

As for the DMV, it needs a complete makeover. (Where’s the tech when you really need it?) I mean, if any of us responded to our client in “DMV time,” we’d all be out of jobs, right? (Right.)

How can I help you?

Julie Gardner | Compass Realty
Not just a Realtor, but a consultant in all things house and home, I’m here to educate, explore, examine and refer . . . In short, you may count on me to take care of your home as if it were my own and anyone who knows me, knows I take pretty darn good care of my home.

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