The right price

How much is this worth? No, I'm not pimping my husband, I mean the miles of empty beach all to ourselves... or as aunt Myrtha would say, "How much does this go for in the Caribbean?"


Nobody wants to feel like they’ve been had in any transaction, and real-estate is no different. But the problem in determining the “right” price for land or a house is that it may have nothing to do with the “fair” price, or the “market” price. And what may seem right one day or year, in retrospect may feel much better, or just bad.

Yesterday, a friend told me of a great deal a mutual friend’s mother had stumbled upon near the city where we live in Turkey. A quarter acre lot, with an old stone house, in a village 20 minutes away from where we live, for $130,000.

Rip-off! I said. The house could be cute-looking but she will need to build it anew (roof leaks, substandard bathroom and kitchen, no insulation, no heating, etc.) I’m thinking of all the Brits and Americans we know who bought “charming stone village houses” and spent fortunes trying to make them livable. But at least they bought them cheap… And if you’re going to be in the middle of nowhere, would you go for just a quarter acre of land? I told him that in Uruguay I am looking at a property that is 60 times that land for half that price, just ten blocks away from the sea! Those were my shy comments.

My friend was shocked. “It’s a great deal! She’s all artsy and she will have room for her pottery and for a garden! And a quarter acre is a huge lot of land for Turkey! And the apartment she sold in the city was three times that price!!”

My point – you might have guessed by now – is that highly subjective factors related to personal circumstances play a large role in determining what something is worth to us. The house that is worth $130k to our friend’s mother would get no more than $50k from me.

My first ever real-estate transaction, in 1992, was the purchase of a condo in Jersey City, in the historic Paulus Hook district, a stone’s throw away from the Hudson River. This condo was the first and only one I saw, and I forgot to even bargain for a discount until my mother screamed at me long-distance. I got a $5k reduction, a good will gesture from the seller who happened to be my landlord in the tenement I was living in. But the thing is, a $30k price increase would still have been the right price for me, because this was the ONLY property available to me. I was an illegal alien at the time, and the only way I was able to purchase was through a shady mortgage obtained for me by the seller, from an equally shady bank in Hoboken that 6 months after the transaction had ceased to exist.

That, and the fact that 3 years earlier I had parked in front of the building in question, looked at the WTC views beyond the river, and decided this was where I would live one day, were the key factors in my price equation. I was just lucky that my dream building fell in the hands of my slumlord-cum-developer.

From the other side of the fence, the same applies to sellers. Even in very liquid markets with readily available benchmarks, setting a sale price is challenging for even the most profit-minded seller. Not to mention pricing houses that are off the "hot" areas, plots in sizes that are not standard, condos with unique features. Here, the subjective takes over again, as pricing a view, or worse still, the smell of the air or the proximity to one’s favorite bakery is a completely emotional process, which may also include other emotional/financial considerations such as need for money, or desire to be somewhere else.

When I sold the Jersey City condo and walked away with a 150% profit on a six-year investment, I was quite happy. Ten years later, it has quadrupled in price since I sold, which prompted the mentally deranged buyer, who emailed me last week, to basically call me a sucker. Funnily enough, I feel like it was quite a success, living in my dream condo for six years, and walking away with a wad of cash, and yet… Dan the realtor’s words continue to echo in my mind. “As long as the river is there” he said pointing at the Hudson from my stoop, “the price of this place will continue to rise.” Yes, I’ve been feeling like a sucker for several years.

My second home, a condo in Sao Paulo, was as much an adventure to buy as it was to sell. Because in Sao Paulo old equals bad, it took me three months of daily viewings to have realtors show me what I wanted to see: an old, very large place in need of renovation. When I finally found it, I obtained a symbolic discount on the asking price, so enamored was I. On reflection, I know a Brazilian buyer would have driven a much harder bargain, as in local eyes, the apartment was as good as condemned. “Detonado” was how the realtor described it.

Two years and a huge renovation later, I was ready to sell, but conditions were far from ideal: I wanted to leave the country, the market was barely beginning to recover from a slump, and every single realtor I contacted refused to take on the listing. It was a 50 year old building, considered undesirable, especially for the quality level at which I had renovated it. To boot, there was a quite rowdy lesbian bar down the block that every realtor seemed to bring up when I gave the address. “Yes, it’s great!” I would say. “It’s open until 5 AM so you can always go for a Coke or to buy cigarrettes!” They were not impressed. Still, I came up with a price that would give me a respectable profit, and said to myself: “All I need is ONE person that feels just like I do.” Six months after my failed realtor canvassing drive, when I had almost forgotten that I was trying to sell, I got a call from an agent. She specialized in another, fancier neighborhood, but she wanted to come visit. Upon opening the door, she gasped, and promised competing bids within a week. She was true to her promise, I got a few bucks over the asking price, and I managed to close on the sale the same day my company announced its first round of layoffs, which I had been planning on being a part of.

Both bidders were foreigners. Where I and the buyers saw an amazing, stylish loft with three en-suite bedrooms, windows in four directions, cathedral ceilings, and walking distance from 5 different movie theaters, most Paulistas in my price-segment saw a trashy looking building with an embarrassingly unimpressive lobby and (horror) a lesbian bar down the block. In the end, I was lucky to find the buyer who shared my perspective and views on the price of the property, within a reasonable stretch of time.

A few months earlier, in the throes of post-renovation depression, on a trip to Uruguay I discovered an area of the coast of Maldonado that literally hypnotized me. In a few weeks I was back, buying 4 plots of land, on a 5 year financing plan offered by the seller. I did not bargain one bit, even though I was buying four plots. I did no research whatsoever around nearby areas. I just bought, because the way I saw it at the time, any money that I did not plunk into real estate installments would be spent on weekend flights to New York, or 3 day visits to friends in Europe, something everybody around me in Sao Paulo seemed to be engaged in, and quite a temptation at the time. After my spendthrift lifestyle came to an end, and facing no source of income for the near future, I negotiated to pay in full two of the four lots, and returned the other two to the seller.

Over the years I continued to buy lots in the same area and in other areas of Punta del Este. Rather than buying the plot for my future home, these have been “investments,” and rather than swimming in cash, I have become acutely aware of each dollar earned, all of which has shed a whole new light on the meaning of “the right price”.