Escape From Pianosa

Well maybe.. Here’s the link to the Sun Article. The community association is not pleased about having a 240 foot skyscraper(?) built on the waterfront..although I’m not really sure why. Right now the site is a parking lot, and there are lots of tall buildings there on the waterfront.

Anyway, this type of development seems inevitable–real estate on the Canton waterfront is so valuable and parking lots are clearly not the highest and best use. And for the city, highest and best use in this case also translates to higher tax revenue.

As for me, I have to see a better argument than “it obstructs some views” to oppose it. I think it’s wonderful that people want to build here. Ten years ago I doubt anyone imagined Canton as such a desirable place to live and shop.

I was looking for information on the redevelopment of the Oldtown Mall area and YouTube brought me this video short by some up and coming Baltimore film makers. If any developers are looking for some visionary ideas, these girls might have it… Or a good laugh if you’re into dark humor at Baltimore’s expense.

Not in Baltimore, at least not at the high-end of the market.

…I won’t be getting my land this way.

At the Washington Post Real Estate Mail bag, a discussion about whether or not buyers should ask sellers the question: “why are you selling?”

As a buyer, I always ask this question, and you should too. A good seller’s agent won’t give up any info, but you should still ask. Every bit of information that you can get your hands on about the seller and the circumstances of the sale will give you an advantage in the negotiation.

So find out what you can, and if the seller is in a hurry or doesn’t have a lot of options, use this to get better terms or a lower price. Be nice about it, but definitely use it.

Of course if you’re selling, don’t give up this information, especially if you’re in a bind.

For anyone who believes that Baltimore lacks affordable housing… I was talking with my commercial broker last week, driving around Northern Virigina, looking at some potential projects. I asked her about the market there, i.e. what’s selling these days, how’s the inventory, etc.

She said “well the mid range is doing very well, but the lower and higher ranges aren’t doing so well.”

I asked her what the middle range was. $700,000 to $1,100,000!

Looks like Maryland is going to tackle ground rent at the state level:

Proposals being discussed include:

• Prohibiting ground rent owners from taking someone’s house over unpaid rent. They would be allowed to collect only back rent and “reasonable fees.”

• Phasing out existing ground rents through a system by which they either are redeemed by homeowners or disappear if the ground rent owners don’t register their ownership within a certain time period. Tens of thousands of Baltimore City homeowners pay rent on the land under their houses, and ground rents also exist in Baltimore and Anne Arundel counties.

• Prohibiting property owners from creating new ground rents.

As for prohibiting ground rent owners from foreclosing on unpaid rents.. I don’t mind this as long as they have some way to legally collect what is owed to them, like something akin to a mechanic’s lien that has to be paid off when the house is sold.

As for phasing out ground rents… that would certainly make home ownership more simple for Baltimoreans, and I don’t really see any benefits that ground rents serve. On the other hand, you have to be careful not to do something that would effectively negate the value of ground rents already in existence.

Some people own thousands of ground rents, and to nullify them would be a horrible violation of property rights.

I’m reading Freakonomics, a wildly popular book that has also caused some controversy among real estate agents. First off, the book really is a great read and fascinating for anyone, not just amateur econ-nerds like myself.

The gist of the real estate section is that the incentives of real estate agents are not perfectly aligned with the incentives for home sellers. Sellers naturally want top dollar for their property, although they will not wait forever to get it. And of course agents also want high sales prices. So what’s not aligned?

Well, let’s say that your home is listed at $300,000 and after a week on the market, you get an offer for $290,000. That’s $10,000 less than what you wanted, a very big number to you. However, it’s not so much for your agent. If the seller’s agent is getting 3%, and has to pay half of that to his broker and the IRS, then a reduction of $10,000 in the sale price equates to a $150 reduction in the agent’s commission. Not really a big deal for the agent, money-wise.

The homeowner has a very strong incentive for wanting a higher price, while the agent only has a small incentive. The homeowner might be willing to wait three more weeks or three more months to get a higher price, while three months for $150 just isn’t worth it for the agent. The homeowner makes the final decision, but the agent has influence on the homeowner’s decision.

Now I believe that good real estate agents will recognize this situation, ignore it, and act in their client’s best interest. In fact, Dubner’s analysis doesn’t take into account another incentive that agents have–the fact that getting a higher price for their client will make for a happier client and ultimately more referrals.

I suspect that the misaligned incentives have a greater effect on agents who are more shortsighted and aren’t thinking about the longer run incentives of providing the best service possible. Any ideas on how to determine whether or not a prospective agent would be affected by the incentive to sell quickly?

Some of the pols are calling for laws that disallow the creation of new ground rents - I don’t really see the point of this. Not too many sellers create ground rents when they sell, and if you’re worried about it you can always specify in the contract that no ground rent will be created at sale.

Ground rent owners need to have a way to legally collect the rent due to them, but being able to seize a home over a $240 debt doesn’t make sense. I don’t see any problem with being able to force a sale, but the ground rent owner shouldn’t get any more than the debt owed and maybe legal fees. If they were limited to collecting their unpaid debt + expenses, I think this problem would go away pretty quickly. Who’s going to sue for $240?

In case you missed it, the Baltimore Sun is doing a big series this week on ground rent in Baltimore.

• Part 1 - On shaky ground
• Part 2 - The new lords of the land
• Part 3 - Demands for reform