Friday, July 14, 2023

Finding Peace and Calm

When I was in the single-digit age range my family gained access to our friend's three season cabin on a lake in Maine where we spent several summer vacations. I distinctly remember one day, just after dinner, I was sitting on the dock watching the infinite color palette of sunset form on the horizon and listening to the loons' calls echo across the lake, when I realized this was where I was most at home and relaxed. It served as a very stark contrast to the life in New Jersey I had accepted as normal. Ever since then I've been on a quest to find the peace and calm I experienced on that lake.

I went to college in New Hampshire and I found that state quite beautiful. The air was clean and smelled of pine, my sinuses were forever clear, and something about the tall trees and hills was reminiscent of my time in Maine. New Hampshire always had high real estate taxes, but as they didn't have any sales tax or income tax the overall tax burden was quite low, especially as compared to New Jersey. While many years ago I had dreams of moving back to New Hampshire, the unfortunate reality is that over the last 35 years the tax and spend locusts in Massatwoshits devoured everything in their home state and moved north to find a new feeding ground. Some time ago I concluded, reluctantly, that I would not return to the Northeast.

Since then I devoted some time every month to zillow.com and realtor.com looking for properties in other areas I thought had good quality of life, low costs of living, a responsible government (i.e. low taxes), reasonable weather, and perhaps most importantly, some elbow room. At first I mostly focused on the Carolinas. I wanted to live near Raleigh as it was a big tech center I visited for business in the late 90's and early 2000's, and while a lot of the tech companies have gone under or left the area since then, I knew I could leverage some of the remaining tech talent in my business. But I eventually realized that there weren't any good deals to be had. 10 acre lots within a reasonable (1hr) driving distance of the airport were rare, and were north of $400K when I did find them. Completed houses were easily double that particularly on the north side of Raleigh, which is one of the more beautiful areas of the state, rivaled only by the mountainous areas in the western part of the state near Asheville.

That's when I started looking west toward Tennessee. At that time I found Tennessee real estate to be reasonably priced but that didn't last long. In the post-Covid years I found large (> 5 acre) lots rising from about $5K/acre to $20K/acre or more and smaller lots (2 acres or less) near the major cities like Knoxville occasionally exceeding $100K/acre. Looking outside the cities I quickly concluded that there is no shortage of land at reasonable prices, but there is a shortage of land with good Internet access, which is just as important to me and my business as other utilities such as power or water. Unfortunately, the US is like a third world country when it comes to Internet access, mostly because we allow private companies to control a bulk of the Internet infrastructure with little to no regulatory oversight. This has given rise to local monopolies that are completely uninterested in prioritizing bandwidth or quality of service.

I am not interested in paying Elon his ransom for Starlink so I eliminated many otherwise amazing properties from my search. Knowing how that service works and the physical reality that only so much data can be put into a given spectrum, there is no substitute for wired Internet service. Sadly, all those Starlink disciples will eventually see their bandwidth reduced to DSL, if not dial-up, levels once everyone dog-piles on the service in a given area, all the while our nighttime astronomical observations and space operations will be polluted with 60000 monuments to Elon's hubris. The upside is I learned that Tennessee has a state program to help companies lay fiber along the power transmission line right-of-ways to support broadband deployments, so my hope is that things will get better for rural broadband in Tennessee in the long term.

A Candidate Appears

I then started looking at a couple areas that I knew had great Internet access, including Chattanooga. In June, just before I started a work trip, I found a listing on a mountain northwest of the city. At first glance it ticked most of not all of my boxes. Although not part of the city of Chattanooga it had the same electrical provider and ISP with a great reputation for network quality of service with bandwidths exceeding 1 Gb symmetrical over fiber, and responsive customer service, all for a price nearly half what I'm paying in New Jersey. Astonishingly, I also learned the town even provided water services to the property so I wouldn't have to drill a well, at least at first.

During the trip I researched every facet of the property and surrounding area. I saw no red flags aside from the price but I figured, even in this crazy market, that would be negotiable. Due to a fluke in scheduling I had only two days off before my next trip so rather than go home I decided to go see the property instead. I arrived the following morning to absolutely perfect weather on the mountain. Mid 70's. Light winds. Nearly clear skies. It was beautiful, quiet, and private. It felt like Maine, sans the lake. My sister happened to call me while I was standing in the road taking in the incredible sights, sounds, and smells, and I described the scene to her. She related instantly.

My agent and I walked across the street to the lone house on this segment of the road and, to my surprise, someone answered. The owner turned out to be a former New Jersey resident, living less than 25 miles from my residence, until he and his wife retired and moved to the mountain a year ago. I picked his brain about all things, from the property itself, to how he built his home and barn, to the quality and reliability of all the local utilities and the local government. He was pragmatic and said that nothing is perfect, but he was happy with his decision to move to Tennessee and leave the "New Jersey ways" behind. Then he laughed and said he knew he had made the right decision when he looked at his tax bill and did a double-take to confirm whether the bill was for the month or the year. Yes, taxes in New Jersey are that high.

Making An Offer

Getting back in the car with my agent I told her that I planned to make an offer on the property. The seller's agent had boasted earlier that the sellers had other interested parties but my agent had discovered ahead of time that all of them had mortgage contingencies, meaning, they had to borrow money to buy the property. I didn't think was possible, as years ago banks generally would not write a note for raw land because of the likelihood of being left with an asset difficult to sell if the owner defaulted. But that was then and this is now. So I called my sister, told her everything, and she offered to contribute the money necessary to bridge the gap over what I had budgeted for land so we could grab it before the others could arrange financing. And that's what happened. Of course, I'm oversimplifying here. What actually resulted was a series of sometimes contentious offers, counter-offers and legal discovery.

This was when I learned about some of the differences between real estate transactions in New Jersey and Tennessee. Most real estate transactions in New Jersey utilize attorneys, retained individually by both buyer and seller, who then review the contract for three days following the execution of the contract called the "attorney review period". During that period the contract can be voided by either party without consequence. In Tennessee, however, most contracts involve attorneys employed by the title company, there is no attorney review period and, as a consequence, contracts are binding upon execution. For this reason I had to incorporate in my offer any contingencies or other clauses that would allow me to void the contract without penalty.

I came up with several contingencies, mostly related to what I wanted to build, store, or do on the property. I didn't think these issues would be difficult to research but they would take time. When the sellers balked at the contingencies I was busy flying, so my agent went to work, doing all of the research within a single day. She called the town officials and with supporting documentation eliminated all of my concerns. So I removed all the contingencies and after a few more modifications we agreed to a very quick closing about two weeks hence. Finally, after a delay associated with a holiday, I finally closed on the property remotely.

Lately, the real estate market has been so hot that the successful buyer is typically someone who outbids everyone else. I'm convinced, however, that I succeeded only because I was able to out-maneuver the other buyers rather than out-bid them. In fact, I was able to get a significant discount off the asking price because I presented an all-cash deal and I was willing to close exceptionally quickly. Of course that begs the question "did I get a good deal?" The answer is a resounding "no". I think I paid almost twice what I consider the fair value of the property but that is the market today.

These market conditions, incidentally, also explain why I elected to build vs. buy. Most completed homes I found were hideously overpriced in my opinion, largely due to the increased demand caused by those who don't want to be bothered to build a home and thus look to purchase existing properties. Buying raw land took me out of that market and eliminated its inherent demand pricing. Yes, I overpaid for the property, and I'm sure I'll overpay for the labor and materials to build what I want, but in the end I'll have brand new structures that will collectively satisfy all of my requirements and I won't be put in the position of spending what's left after the mortgage to renovate an existing home. I did that once before and it didn't end well.

Professional Ethics

Initially I spoke to the seller's agent because her contact information was on the listing. This agent was very forthcoming with information and extremely helpful, at least initially. She walked the property the morning I called, took pictures and video and sent those to me. She also used a mapping tool to help show me the outlines of the areas cleared by the former owners. Her efforts were the reason I decided to pursue the property.

As my interest in the property intensified and I booked travel to see it, I elected to seek out a buyer's agent in the area to assist me further with the transaction and to walk the property with me. She came very highly recommended, via a referral through my sister's agent in Florida, and I was glad to have her counsel. I didn't think anything of doing this at the time as it's convention to do this in all real estate transactions, especially in New Jersey. There are exceptions, of course, but what I did was most certainly "normal". I kept my agent in the loop and told her when I was planning to meet the seller's agent at the property.

Now before I get too far ahead, some background is in order. If a buyer wishes to have the seller's agent represent them that condition is called "dual agency". Dual agency is currently illegal in 8 states: Alaska, Colorado, Florida, Kansas, Oklahoma, Texas, Vermont, and Wyoming. In states like New Jersey where it is legal, interested parties are required to sign a disclosure statement indicating awareness and acceptance of the dual agency status. This is because dual agents have an inherent conflict of interest when representing both buyer and seller. The job of the seller's agent is to get the highest price and the quickest sale with the most favorable terms for the seller, while the job of the buyer's agent is to represent the buyer's interests, seek the lowest price and terms most favorable to the buyer. Of course, this isn't as cut and dry as it first appears when you follow the money and realize that even the buyer's agent is being paid through the seller's commission and it is ultimately in the best interest of the buyer's agent to drive up the sales price of the property. But that's the point of all that pesky business ethics training Realtors go through before they get their license.

I arrived at the property to find both agents separated by 30 feet, each talking on their phones. As I approached my agent the seller's agent came over and went on what I'd call a "southern belle rant", indicating in the most polite but damning way that she came into the transaction fully expecting to represent me exclusively, and by soliciting the involvement of a buyer's agent, she stood to lose a lot of money (the buyer's agent's cut of the commission). Then she threatened me in the most polite way possible that if I elected to retain a buyer's agent I would lose money too because she had planned to effectively kick back some of the buyer's agent share of her commission to me. As we had never previously discussed anything of the sort I saw this for what it was: a hollow promise designed to pressure me into the dual agency relationship. I lost all respect and tolerance for her at this point.

I explained that at no time did I agree to dual agency, verbally or in writing, nor I did I ever imply that I wanted her to represent me. I simply expected her to provide information that she was obligated to provide to any buyer. In short, I told her that this was her job and I expected her to do it. She didn't see things that way, and said that she would not walk the property with us or further assist us directly in the transaction as she viewed that as the responsibility of my agent. I then had to explain to her that by refusing to provide information about the property she was acting unethically and most certainly not in the best interests of her client. Then she completely shut down and left.

Shortly thereafter I enthusiastically signed my buyer's agent agreement and proceeded to walk the property with her. During our walk my agent explained that in Tennessee dual agency is not illegal but highly frowned upon, and she suggested we report the seller's agent to the NAR for clear professional ethics violations. Since I knew we had to work with her for the duration and I didn't want her to intentionally scuttle my deal simply out of spite (which is also an ethics violation, but she didn't seem to have a problem with those), I elected not to do or say anything until the transaction was complete.

While the seller's agent eventually responded to questions and other issues throughout negotiations, after the closing my agent relayed to me that the seller's agent had been unusually difficult with her until the very end when my agent felt it necessary to approach her about her behavior. I'm convinced if it weren't for my agent's very hard work and infinite patience, the deal would have never happened. My agent, who had been in real estate for over 20 years, eventually revealed that the seller's agent had only been in her position for a few months. While being new at the job is no excuse for her behavior, it did explain some things.

The morals of the story? Consider retaining a buyer's agent, even if you have to pay them directly out of pocket. That way you'll know you have someone advocating for you. Also, make sure that the seller's agent knows that you'll be retaining a buyer's agent so the seller's agent won't act surprised, even if they have no right to be.