Truck and Barter

Tricky Transaction Cost Strategies

As some may or may not remember, I recently relocated to the Washington, DC area (Falls Church, so stress on the "area" for those who don't know the layout). Not having the time or capital to invest in buying, I was once again plunged into the ugly world of renting an apartment.

I found a place for a price I was willing to pay and just moved in. During the process of investigating the place, I was told repeatedly that the management company had a hassle-free, 30-day, don't-like-it-you-can-leave-for-free policy. At first I thought, well, ok, that's nice. But I didn't think much about it until later.

Later, of course, when I was considering taking them up on the offer and getting out of the place I now find myself. The apartment is passable, but has some features that, on the margin, would put it below other places I had seen. Of course, I didn't know of these until I moved in.

Which, conveniently or inconveniently depending on which side of the table you're sitting on, is when I thought more about the 30-day policy. While it's pitched as a way to guarantee that "you'll be happy" with your home, it really does something much different: it prevents the management from having to be responsive to situations that are brought up during move-in.

In both time and money (though mostly money), it's not worth it for me to leave, despite the numerous problems I've encountered. None of them make the place "unlivable" by any means. They are, however, enough that I sought out plenty of people to complain. In the midst of an argument, I realized what was going to happen should I suggest that I wanted to leave. "Fine," I heard the likely reply "we'll get you your security deposit right now."

The cost to the management company is very small should I decide to leave, especially when the housing market is as tight as it is here. I, on the other hand, have to face considerable costs should I wish to pack up again, find a truck or movers, locate a new apartment, and get out of the deal. And I'm on the low end of the spectrum of this situation. Recently, in the management office, I witnessed a similar problem being voiced by another tennant: a blind man with a seeing-eye dog that had been given a place without specific features he needed. His ire over this was met with cool patience: he is always free to leave if it's that bad. I didn't see how it worked out in person. Rather, when I went to voice my own complaints, each person in the leasing office mentioned to me that he had stayed (they knew I had seen it, and at least pretended to be upset that it had gotten to that point).

"That's no victory," I said. "In fact, it probably simply reinforces your poor performance." I spoke calmly, but could tell the manager was offended. I tried to explain the problem: the guarantee dramatically lowers the cost to them when someone is very unhappy because it is included in every contract that the lease can be nullified within 30 days. The fact that the residence company only has to hand over the small check (they don't require a full month's deposit) means they didn't lose out on much in principle or interest. And the time to end the contract is very different than a long argument between landlord and tennant about the condition in which the apartment ought to be when moving in takes place. In contrast, the blind man would have to begin his search again for a place that fit his needs, then go through the process of packing and moving all over again (which, I'm assuming, is quite a bit more of a hassle than it was for me). Knowing that, the company can let the problems with the current place be more significant than other apartment complexes, and still retain tennants. We're free to leave because it's so easy for them to end the contract, or to dawdle while answering service requests that they just don't face much cost in turning the apartments over.

To which the manager told me, "No, the guarantee is there only for your protection."

Posted at August 8, 2004 05:29 PM | TrackBack