Has Anybody Seen Real Estate Intervention?

This HGTV show takes place in Baltimore, Maryland, and I can tell you from my own on-the-ground observations that the city has been absolutely pounded by the fallout from the Great Housing Bubble. And the Baltimore crash is being made much worse because in a declining market, the city’s warts can no longer be ignored for promises of rising property values and the resultant gentrification of so-so neighborhoods.

No, in this it-turns-out-$350,000-is-a-lot-of-dough market, buyers pay very close attention to the crime rate (two summers ago in Baltimore, there were two murders a night. I don’t mean a body found in an alley and cops and coroners try to figure out the cause of death—I mean murder, where the gunshot wounds in the back of the dome take out all the guesswork), how far you need to walk to certain amenities, and proximity to undesirable aspect of city life—these things matter now to sellers, whereas they used to be overlooked just get in the game. And not just in Baltimore. Long Beach, with its own set of (similar) problems, will get absolutely crushed in less desirable neighborhoods.

Anyhow, the show features homeowners who bought at or near the peak, and for whatever reason (job relocation, ticking time bomb Option Arm loans, baby on the way, etc.) need to sell in a rapidly deteriorating market. Typically, the homes have been rotting on the market for up to a year at inflated prices, and the sellers strongly believe they are priced perfectly, it’s just that the right buyer hasn’t come along yet. Sound familiar?

It’s the job of the hosts to show the sellers a recent sale and a nearby listing—usually much nicer, and, importantly, priced considerably lower—to gauge reactions and get the sellers to justify their greedy asking prices in the face of undeniable evidence. It’s a very compelling show for a few reasons.

First, the denial and aversion to reality is astounding. At first I was convinced the show was completely staged. There is no way sellers are this delusional, I thought. But, it’s what we see in Long Beach every single day. Maybe it was just shocking to see it play out on camera?

The way the sellers criticized the comps’ amenities to make their house look better and justify their asking price was simply astounding. There was so much twisting it's like watching a contortionist making Wetzel’s Pretzels. One young woman who owned a dumpy, all-original cottage believed that a comp’s brand new kitchen with tile floors, stainless steel appliances and gorgeous new cabinets, “Bastardized the cottage feel.” The house was now ruined in her mind.

She said that buyers would prefer her (piece of shit) house because it was original and they could “put their own personal touch on it.” The host pointed out that this home was completely upgraded, needed zero work and was priced $20,000 less—did she really think buyers would pay 20 grand MORE for the honor of giving up months of their lives and tens of thousands of dollars to “put their personal touch” on her dilapidated home?

Owners claim the comps were supposedly in “dangerous” neighborhoods or far from transit—despite being within blocks of their property. Brand new hardwood floors “aren’t as cozy as carpet.” A seller with no backyard badmouthed a huge, spacious yard because the fence is “too low.” A row house with an extra bed, bath and about 900 square feet “needs interior painting,” so it should have sold for less and actually justified their inflated asking price. It was simply amazing.

In addition to the denial, the victim mentality was alive and kicking. The woman with the dilapidated cottage claimed she was duped into a “predatory” Negative Amortizing Option ARM that was set to explode in her face. It doesn’t take a CPA to figure out there’s something strange about a detached home in a nice neighborhood requiring a lower monthly payment than a one-bedroom apartment. But she never questioned it. She just wanted to prove to her family that she could “achieve” homeownership, so it’s best not to ask too many questions about how a mortgage is so cheap. Denial on the way out, denial on the way in.

I get it. People are angry. They don’t want to own up to their bad investments. They don’t want to admit they were too dumb to read the contract on the single most expensive investment of their lifetimes. They don’t want to accept that their house isn’t as special as they are convinced it is. But the inability to accept reality—even when it’s planted in front of their faces—is incredible to watch.

We now have an inside look at exactly what’s going on in Long Beach: The sellers who “don’t want to give it away,” the sellers who would rather rent it out and bleed $400 a month for the next five years than cut their losses and admit they aren’t perfect, the sellers who believe their place is “special,” the sellers who have utter contempt for “low ball offers” (that happen to end up being very close to what the house eventually sells for)…it’s all there.

Which brings me to another interesting facet of the show: it’s cathartic. As a potential buyer watching from the sidelines as already-low inventory is taken off the market in anticipation of a rebound, it’s nice to see (most of) these people finally accept reality. Whether it’s a short sale, bringing cash to the table, accepting that a $7,000 bathroom addition no longer equates to a $10,000 price increase, or breaking even and giving up their grandiose dreams of massive bubble profits…these are good things for me personally, and for American families in general.

Sure, there’s some schadenfreude in there—it’s great to see cocksure, oblivious greed-heads, deep in denial, get a frying pan to the face—but the majority did things right and got normal loans. It’s just that their timing was off. You’re telling me you never bought a stock when it was too high?

It’s not really about that.

It’s more about closure, and seeing these people living in new cities and starting new lives (and in most cases renting!) without this massive ball of stress orbiting their head. Now they’re free, they’ve learned valuable lessons, and someone who has been priced out for years can finally swoop up an affordable house to live in—so affordable that if they need to sell they won’t be financially destroyed.

It’s how it should be, and in this post-Property Ladder and Flip This House world, it’s good to see that a little more reality is finally making its way into “Reality Television.”