The Redfin listing for this Laguna Niguel preforeclosure home does not designate it as a short sale, but how can it not be one? The owner put $0 down when he bought it during the bubble, and he is now trying to sell it for more than $150,000 less than he paid about two years ago.
As you will see, there is much more to this story than meets the eye.
28281 Via Alfonse, 92677
Asking price: $649,900
Asking price/ sq ft: $375
Income requirement: $162,475
Purchase price: $830,000
Purchase date: 5/19/06
Size: 3 beds, 3 baths, 1,731 sq ft (built in 1989)
MLS: S532406 (3 days on Redfin)
Zillow Zestimate: $645,500
2006 property tax: $7,207
HOA dues: $142
Type: Single Family Residence
Stories: 2 Levels
Lot size: 4,040 sq ft
From listing: Wonderful two story home in Laguna Niguel. This home features 3 bedrooms, 2.5 bathrooms, a family room with a fireplace, a formal dining room, mirrored closet doors, and a great view of the surrounding city. Home has access to association amenities, which include a pool, spa, tennis court, and work-out center. Come and enjoy all the wonderful things this home has to offer.
Considering how the photos look, it appears the property is already vacant, so it seems unlikely the owner will be trying too hard to keep the house. Does the bottle of alcohol in this picture come with the house, or does that have to be negotiated separately?
As we mentioned, the owner obtained 100% financing (78/22) from JPMorgan Chase. The notice of default was filed on New Year's Eve.
Assuming it is possible to successfully sell the property for the full asking price, the loss would be $219,094, including 6% sales costs. Not a good day for the lender. And it's not the only one who will be out a lot of money.
Think this is an isolated incident in this neighborhood? On this street? Wouldn't you believe it: 28272 Via Alfonse is also headed towards foreclosure. And, 28371 Via Alfonse is an REO that is not yet listed for sale.
All $0 down deals using virtually identical means of financing. All purchased in mid-May through early June of 2006. All by the same investor.
That's right: In a span of less than a month, our real estate investor "bought" three properties on the same street - for a total of $2,390,000 - using none of his own money. Carleton Sheets would be proud!
But the fantasy of real estate riches soon ended, and each of the three homes began the foreclosure process by early January. Fortunately for the investor, he didn't have to sacrifice his home. In fact, his primary residence is in another, very wealthy South OC city.
All told, the loss on these properties will be significant, and the lenders will be left holding the collective bags. Who do you get angry at here? The investor for walking away and potentially not disclosing on their loan applications that they were buying so many properties and leveraging themselves to the hilt? Or do you cry foul on the lenders who enabled this behavior by funding the loans?
No matter what your personal opinion, there is no denying it is the lenders that will be taking the brunt of it in the shorts. And the neighbors can't be too happy to have three homes possibly sitting vacant on the street, either.
Friday, May 16, 2008
3-time failure in Laguna Niguel
Monday, April 21, 2008
UPDATE: Yes, a failed flip in Laguna Niguel
We posted in late February about 24171 La Hermosa, a property in Laguna Niguel that looked like it was a flip heading for failure. To recap:
Asking price: $575,000 (now $550,000)
Asking price/ sq ft: $353 (now $338)
Purchase price: $750,000
Purchase date: 11/13/06
Size: 4 beds, 2 baths, 1,628 sq ft (built in 1966)
MLS: S503764 (178 days on Redfin) - now 232 days
ZipRealty price tracker: Price Reduced: 09/17/07 -- $899,900 to $839,900
Price Reduced: 09/25/07 -- $839,900 to $829,900
Price Reduced: 10/18/07 -- $829,900 to $799,900
Price Reduced: 11/13/07 -- $799,900 to $650,000
Price Reduced: 12/21/07 -- $650,000 to $599,900
Price Reduced: 02/25/08 -- $599,900 to $575,000
Now: Price Reduced: 04/08/08 -- $575,000 to $550,000
Description: This property has been completely remodeled.Granite counter top in the kitchen with a serving bar.Office area or eating area opens to the backyard.Beautiful tile flooring throughout.Newly painted,cozy fire place in the family room with french doors opening to the back yard.Newly painted interior,crown molding throughout.New cabinetry in the kitchen.Both bathrooms have been redone with new flooring and fixtures. Move in condition very light and bright.Close to the freeway,shops,park and restaurants.
Here are the details behind the transaction. It's easy to see how things went wrong.
11/13/06: Purchased for $750,000 with 95% financing from Greenpoint Mortgage Funding.
12/5/07: Notice of default filed on $600,000 1st mortgage, delinquent amount of $21,343 (property had been on the market for a little more than three months at this point)
3/13/08: Notice of trustee sale filed, sale amount established at $635,818. Property is scheduled for auction May 16.
It also looks like there may be some issues with unpaid property taxes, too.
Assuming the property is able to be sold for the full asking price, the loss would be $233,000, including 6% sales costs. And, remember, we don't know how much additional money was spent rehabbing the property.
Wednesday, February 27, 2008
Failed flip in Laguna Niguel?
*In case you haven't already, be sure to read this testimony by NYU's Nouriel Roubini on "The Current U.S. Recession and the Risks of a Systemic Financial Crisis." Scary stuff.*
It would certainly appear that this is a sputtering flip based on the sales data, photos and home features, and if so, the unfortunate timing of this endeavor could not have been worse. The asking price has already been reduced by $324,900 and yet the property still is on the market.
24171 La Hermosa, 92677
Asking price: $575,000
Asking price/ sq ft: $353
Income requirement: $143,750
Purchase price: $750,000
Purchase date: 11/13/06
Size: 4 beds, 2 baths, 1,628 sq ft (built in 1966)
MLS: S503764 (178 days on Redfin)
ZipRealty price tracker: Price Reduced: 09/17/07 -- $899,900 to $839,900
Price Reduced: 09/25/07 -- $839,900 to $829,900
Price Reduced: 10/18/07 -- $829,900 to $799,900
Price Reduced: 11/13/07 -- $799,900 to $650,000
Price Reduced: 12/21/07 -- $650,000 to $599,900
Price Reduced: 02/25/08 -- $599,900 to $575,000
2006 property tax: $2,210
Type: Single Family Residence
Stories: One Level
Lot size: 8,640 sq ft
From listing: this property has been completely remodeled. granite counter top in the kitchen with a serving bar. office area or eating area opens to the backyard. beautiful tile flooring throughout. newly painted, cozy fire place in the family room with french doors opening to the back yard. newly painted interior, crown molding throughout. new cabinetry in the kitchen. both bathrooms have been redone with new flooring and fixtures. move in condition very light and bright. close to the freeway, shops, park and restaurants.
Notice Zillow's reported purchase price of $750,000. Also notice the focus areas of the upgrades: The kitchen (new cabinets, new granite counters?) and bathrooms (re-done flooring and fixtures), fresh not-just-white paint, nice-looking tile flooring and an attention to detail in terms of curb appeal.
Then, look at the original asking price: $899,900. Assuming a sale at that price and subtracting 6% in sales costs, the profit would be $95,906 before rehab costs. Again, assuming that this is a failed flip, there seems to have been plenty of room to make all the upgrades in this house and still come out with a nice profit. The only problem was the asking price proved to be far too high for the market.
What's clouding the is-it-or-isn't-it-a-flip issue is the fact that the property was first listed for sale in September 2007 - a full nine months after Zillow says the property was purchased by the current owner. Normally, that type of timeline is too long for a flip (time is money!), so it leads us to believe there might be an alternate explanation: Perhaps the owner bought the place and upgraded it intending to stay, but then was forced to leave...they just happened to make the types of upgrades typical of a flip, and also decided to price their house into the stratosphere.
Of course, it's also possible that this is indeed a flip that was financed in an all-cash deal, so time was not quite as much of the essence. The truth is any outsider's guess.
If the latest price reduction does the trick and the property sells for the full asking price, the loss would be $209,500, including 6% sales costs. Notice, though, that that amount doesn't include all the renovations and upgrades, so the actual loss is most certainly more.
Thursday, January 10, 2008
Flippin' for $ in Laguna Niguel
It's been a while since we profiled what looks to be a very likely flip attempt in South OC. Nothing against the remaining flippers still trying to operate out there; we didn't forget about them. It's just been hard finding any of their properties lately.
The MLS is a crowded place these days you know...
Income requirement: $168,750
Purchase price: $560,000
Purchase date: 8/02/2007
Size: 3 beds, 2 baths, 1,500 sq ft (built in 1971)
Price Reduced: 11/20/07 -- $749,000 to $724,900
Price Increased: 12/6/07 -- $724,900 to $750,000
Price Reduced: 12/11/07 -- $750,000 to $695,000
Price Reduced: 1/05/08 -- $695,000 to $675,000
2006 property tax: $2,252
Type: Single Family Residence
Lot size: 7,840 sq ft
From listing: Compare to new this completely remodeled/redesigned home. All New Maple cabinets Granite counters Travertine Versi floors Mahogany Front doors, Carriage style Garage doors with belt drive opener, New paver drive way and Patio Custom base Boards and door casing, custom paint, New upgraded fixtures etc. no association fees home looks brand new. Valley view from back yard room to add on
What's with the entry way? Notice the...umm...distressed-looking wall to the left of the door? We're assuming the pictures were simply taken during the "complete" remodel/redesign.Allow me to play Captain Obvious for a moment: Things are not going too well with this property. Assuming this house wasn't purchased for all cash, the potential profit on this place is continuing to shrink as the months (and more importantly the loan payments) tick by.
If Redfin is correct, the owner now has held the property for around five months - probably about two-and
-a-half longer than they had hoped. When this property was first listed at $759,900, the potential gain would have been a cool $199,900 before remodeling, holding and sales costs. That would probably have been one heck of a payday.After some time on the market and four price reductions (plus one price increase!), the potential profit is still unrealized and this property is languishing without a buyer. If we assume a sale at the current high asking price of $675,000 and subtract 6% for sales costs, the profit would be $74,500. Still pretty sweet, but again, this does not take into account money spent fixing up the house and making mortgage/interest payments.
It's hard to estimate just how much money went into fixing this house to ready it for a sale. Considering the amount of work that went into this place, it wouldn't be surprising if the costs were substantial.
The photos are interesting. As you can see, some images with the listing show the property during the renovation.If I were a real estate agent, I'd wait until everything was done so I could show off how the property turned out - its peak form. Instead it sort of comes off like, "here's how I spent my flip - in pictures."
The bottom photo on the left looks like a security cam screen grab. If you decide to go out and see this house, don't forget to smile just in case! :)
* - Redfin has this one at a price range of $659,000-$675,000
Thursday, October 11, 2007
File this one under "makes completely no sense"
The California Association of Realtors' chief economist made a quasi apology about a prediction she made two years ago that "dismissed fears of a bursting California real estate bubble and called for only modest sales declines."
In fact, CAR said it predicts prices in California to fall 4 percent in 2008, which would mark the worst year since 1993.
As the real estate market here in Southern California continues to slowly implode, this seller in Mission Viejo had an idea. A big idea. A bold idea. Here it is: Buy a modest-looking 25-year-old house. Build on an addition to bring it up to a mind-boggling 7-bedrooms, 7-baths and 2,460 square feet. Then proceed to remodel and overimprove the heck out of it with granite and stainless steel in the kitchen, travertine and tile floors, plus a new roof, carpet and paint.
Then, to top it off, set the asking price to $280,900 more than you paid for it in July 2006, which happened to be right as the real estate bubble was beginning to deflate.
This seller is either incredibly shrewd and gutsy, or destined to fail miserably. Want to take bets as to how much money they poured into this place? One thing they forgot to pay for was a good photographer. Check out the picture to the left. The red arrow is pointing to someone who appears to have been caught talking on a phone in the backyard.
New rule to RE agents/people who take pictures and then put them on the MLS: At least glance at your pictures before you post them. Having people/animals accidentally appear in your photos only makes you look unprofessional.
26291 Avenida Calidad, Mission Viejo
Sales history
7/12/2006: $669,000
5/30/2006: $412,500
Asking price: $949,900 (32 days on Redfin)
From listing: "New addition with everything redone in & out. New appliances, new tile roof, new paint in & out, new carpet, new travertine floors, new kitchen cabinets. A must see. .. . too many to list. Bring your big family to this one. .. ."
Big family is right. Who needs that many bedrooms? The Brady Bunch would probably have considered it unnecessary. You might as well be running a small dorm with this many rooms. Or perhaps, even an elderly care facility.
Oh yeah, the three closest single family houses for sale are asking the following: $690,000; $589,000; $618,000. Doesn't appear that the neighborhood supports this kind of price, considering it's about $300,000 more expensive on average than the others.
Assuming they find someone who wants a 7-bedroom house of this size, in this location, at this price, the potential profit would be $223,906, including 6 percent selling costs. Then subtract from that however many thousands they spent "upgrading."
Friday, October 05, 2007
A flippin' good time in Dana Point
New paint and appliances coupled with a three-and-a-half month turnaround time from the previous sale in June leads me to believe we're looking at a flipper trying to cash in on South OC real estate. Will they succeed?
7 Saint John, Dana Point, 92629
Asking price: $779,000
Purchase price: $630,532
Purchase date: 6/15/2007
Size: 3 beds, 2.5 baths, 1,967 sq ft (built in 1989)
MLS: S507287 (6 days on Redfin)
From listing: Great Value! New neutral paint, carpet, tall baseboards, travertine, granite and steel appliances. Shows really well! Priced to sell!! Guard gated community in Monach Beach near St. Regis. Close to beautiful beaches, shopping and resorts.
"Great value!"? If you consider the current seller paid $148,468 less for this property in June, I'd tend to think they were the one who got the great value.
And, is this property really "priced to sell" as its listing claims? The closest comp (7 Antigua - same size) is listed for $839k, so the flipper is looking good there. Wonder if they're worried that the Antigua property has been on Redfin for 73 days without any action...
Checking recent sales, 41 Saint John (are you catching on to the Caribbean theme yet?) sold for $800k back on July 11. And, 34 Saint John sold for $817k in April (at the least, these owners are looking at a $38k decline in value assuming this flip is sold for its asking price). It's hard to tell if a buyer is going to step in to snatch up this property. I personally wouldn't be surprised if there's none to be found (estimated required income is about $195k per year, plus a sizable downpayment should be necessary), but hey...you never know.
Assuming a sale at this asking price, the flipper stands to make a profit of $101,728, assuming 6 percent selling costs.
Sunday, September 16, 2007
Flipper alert: Dana Point
We've made the point a few times, but here it goes again: Yes, homebuilders may be hitting the panic button and are trying (hoping) to unload as much of their inventory as possible by slashing prices and adding incentives for buyers right now, but there remains an intrepid few who are looking to turn a quick profit by flipping OC real estate.
This week's flip in the making takes us to Dana Point. Here are the details:
34038 Selva Road #116, Dana Point, Calif., 92629
Size: 2 beds, 2 baths, 1,000 sq ft (built in 1982)
MLS: S491891 (97 days on Redfin)
Asking price: $629,000
Asking price/ sq ft: $629
Purchase price: $555,000
Purchase date: 1/12/2007
2006 property taxes paid: $1,251
HOA dues: $370
Type: Condominium
Style: Cape Cod
From listing: What a Beautiful Remodel on OCEAN SIDE of PCH across from Salt Creek Beach, close to the Ritz Carlton and St. Regis! Kitchen has new appliances, new counter tops, garden window. Italian tile floors in kitchen, LR, D/R, and both patios. All new doors to patios. Walk along the beach or enjoy the community pool and spa. Private lower level. Near new Headlands Development.
Despite the initial red flag of not actually having a photo of the exterior of this property with the listing, this place doesn't look too bad. It's possible our flipper is banking on this unit's prime location to bring in the dough. And believe us, this is a prime location - beach close and near the Ritz Carlton and St. Regis hotels. Not surprisingly, they're not the only listing in this complex to tout those facts.
If this property sells at the current price, the current owner stands to make $36,260 - assuming 6 percent selling costs.
Four problems with this scenario:
- The potential profit does not take into account money spent fixing up the property. Who knows how much this "beautiful remodel" cost. Well, guess the flipper does. We know from the listing that, not surprisingly, one focus area of the remodel was the kitchen. Classic flipper MO to throw in new kitchen appliances and counters.
- Neither does it take into account holding costs. Usually, a successful flip will involve holding the property for as little time as possible, therefore cutting down on the amount of interest owed to the bank. The longer the owners cannot sell, the more of their profit is eaten up. Guess there's a chance the current owner paid all cash for this and doesn't need to be in a rush to unload it, but doubtful.
- This property was purchased in January. We know the market has fallen since then. Therefore, the property's intrinsic value is less than it was when the flipper purchased it.
- The property is nearing the 100 days on Redfin mark without a sale or price reduction. Therefore, it is reasonable to believe that this property is not priced correctly. Too high you say? Let's confirm by glancing at the comps...
*34040 Selva Rd #122 is also 2 beds/2 baths, 873 sq ft. It's listed for $685,000. Why so high you wonder? Glad you asked. This is no ordinary condo! It's a "luxurious top of the line ' Safari / Plantation Style' remodel by prominent Scottsdale, AZ. designer." Talk about a mouthful. Time on Redfin: 15 days.
*34036 Selva Rd #108 is 2 beds/2 baths, 873 sq ft. Its asking price is $569,900, which is $59,100 less than our flipper. Time on Redfin: 137 days. Original asking price: $609,999. Not very good news for our flipper, since this property has already been dangled on the market without success.
*34022 Selva Rd #52 is the same size as the others. The current owner is asking $549,000, making this property the lowest-priced of the bunch. If a buyer decided to choose this property over our flippers' (and they would, according to the principle of substitution, which says someone is going to pick the cheaper of two properties that suit their needs equally as well), they would save a cool $80,000. Nothing significantly different than our flipper's property - this one was "remodeled just a couple years ago." Days on Redfin: 70.
Bottom line here: Flipping properties is a risky game - even more risky when there is a dearth of buyers looking to enter the market. The philosophy behind this type of project is usually that you make your money when you buy the property at a discount, because you've got a cushion to do some fixes in key areas, list it at a fair retail price, and realize a profit (calculated ahead of time) when it sells.
But these days, when real estate is concerned, all bets are off.
Wednesday, September 12, 2007
Every house has a story
And what an amazing tale this Lake Forest property could tell. This two-bedroom, 1,222 sq ft property, located at 21521 Kenmare Drive, was purchased in January for a whopping $650,000. Now, just eight months later, the property is already headed towards foreclosure.
The owner is hoping to eject before the bank takes it, and has this property listed for sale at $469,000. If it sold for this price, and we subtract 6 percent for selling costs, the loss will be $209,140. That's not even the interesting part.
We're going to break down the listing description, because frankly, it's entertaining. The text from the listing is in italics. My analysis/translations of the realtorspeak follow, in bold. Note: I've broken the listing description into a few paragraphs. Otherwise, it would have been a huge glob of text.
In foreclosure and bargain priced for the ""sweat equity"" investor or smart future homeowner! (The latest owners tried to rehab this place and failed miserably. You want to take a shot? I'm not even going to touch the "smart future homeowner" part considering where the RE market is right now)
Not trashed but some of the rehab was not completed. (Yes, it may look like the remnants of an AC/DC concert, but we swear, this place didn't turn into a dump on purpose)
Finish the job and build equity wealth! (Some assembly required...again no comment on the "equity wealth") Call agent for details. Private backyard with patio, 2 car attached garage. 2 bedrooms, 2 baths + loft. (Only thing missing is some front-yard grass that's still alive)
Living room w/fireplace. New floor tile in living areas. (The one thing that did get finished before the carnage took hold) Carpet looks newer. (Windows ME looked pretty good from a distance as well - how did that one turn out? Appearances can be deceiving, so the carpet will, in reality, need to be replaced ASAP) Cabinets need trim work. Baths need mirrors. (The old mirrors are gone. They may or may not have been removed and sold to coke dealer Tony Montana from Scarface)
Mstr br has walk-in closet. 2nd bedroom has access to 2nd bath - could be 2nd master bedroom on 1st floor. Eating area in kitchen. Fully fenced backyard has own patio for alfresco dining. (Fancy word for eating outdoors. Probably a bad idea to try and introduce sophistication to this listing, only a few sentences after using the word "trashed") Ok for investors to purchase. (See first comment)
Hoa fee approx $50/month. Park close by. Great area with curved streets, rolling hills and close to everything. Pride of ownership in this area! (Not including this property) Property has been cleaned up (Can you imagine how awful this place probably looked before we ran a vacuum through it?)***subject to lien holders approval of price, terms, conditions*** (Good luck getting them to agree to anything. Have a nice day)
Wednesday, September 05, 2007
Flipper alert: Aliso Viejo
Yes, there are still an intrepid few out there looking to turn a quick profit by flipping real estate in Orange County.By the way, this entry comes on the heels of the news that the nation's largest lender, Countrywide, could be about to lay off a few thousand workers. Is wheeling and dealing with real estate for a profit is still a good idea? Judge for yourselves...
34 Cellini, Aliso Viejo, Calif., 92656
Size: 3 beds, 2.5 baths, 1,640 sq ft (built in 1989)
MLS: S501897 (17 days on Redfin)
Asking price: $599,900 (below $600k!)
Asking price/sq ft: $366
Purchase price: $523,000
Purchase date: 6/28/2007
Other sales history: 05/01/2002: $323,000
05/30/1991: $218,500
ZipRealty price tracker: Price Reduced: 08/25/07 -- $614,900 to $599,900
From listing: Totally remodeled beauty--end unit--huge yard--ultra private location at end of cds. One of aliso's best! All new designer interior includes slab granite counters, ss appliances, gorgeous wide plank wood flooring, high-end carpet, travertine f/p & baths, jacuzzi tub, 5in. Baseboards, new paint, recessed lighting, new sinks/faucets/fixtures. 3 true bedrooms, 2.5 baths, 2 car att gar, vaulted ceilings. Warmth & elegance in an unmatched setting. The yard is enormous--see more at www.34cellini.Com.
Some classic signs of a flip are here - notice in the photos above a focused remodel on the kitchen and bathroom. In short, we're looking at these sure-to-please upgrades: granite counters - check; stainless steel appliances - check; new water faucets and other small fixtures - check; new paint - check; new carpet - check; travertine shower in the master bath with new shower door - check; new wood flooring - checkThis appears to be a good candidate for a flip, and in an appreciating market seems like it could be a winner. This property is in a pretty good area and is getting to the age where some updating makes it stand out from the competition. It also has an unusually large backyard for a condo, and with the flippers' touches looks like a nice place to live - if you want to pay top dollar in a declining market for a turnkey property.
Seems like a methodical flip to us. The current owner bought a little more than two months ago, and has been hard at work since. They've pumped some cash into specific elements of the property designed to catch a buyers' attention and get maximum bang for the buck. Will this flip succeed?
Interesting that in less than three weeks on the market, the price has already been reduced by $15,000 - is the flipper is getting antsy about their endeavor, or is this a calculated price reduction to draw attention?
Oh, by the way - Zillow has this property pegged at a value of $531,519. A property in this complex did sell in March for $579,000. But that was then, this is now.
One other problem: The neighbor at 3 Giotto (same square footage) is asking $474,900 - that's a whopping $125,000 less than our dear flipper. All's fair in love and real estate price wars, after all. And, in case you're wondering, 3 Giotto has been collecting dust on Redfin for 82 days.
If the flipper's property sells at the current asking price, they will net $40,906, assuming 6 percent selling costs. This does not, however, factor in costs of improvements. Not bad at all for two months' work, though.
We'll follow this situation to see what happens.
Thursday, August 02, 2007
Flipper alert: Costa Mesa
Yes, some people are losing their shirts as the real estate market is tanking. But there are still those intrepid few who think - no - know that there is still plenty of money to be made in Orange County, Calif. by flipping real estate. We'll keep our eyes on this one to see what happens:
2662 Redlands Drive, Costa Mesa, Calif., 92627
Size: 3 bed, 2 bath, 1,245 sq ft (built in 1950)
MLS: U7002748 (35 days on Redfin)
Current asking price: $899,000
Purchase price: $730,000 (4/24/2007)
Other price history: 11/19/2004: $687,500
ZipRealty price tracker: No reductions
Other info: Stories: 1
Type: Single Family Residence
County: Orange
Neighborhood: East Costa Mesa
From listing: Fabulous remodel with a 'grandfathered in' office/study. All new windo ws, some doors, bathrooms, kitchen, stainless steel and black appliances, decorator tile thruout, off white carpet, hardwood floors, builtins around the fireplace, chandelier, paint inside and outside, separate indoor laundry room, landscaping, garage door, wrap around front porch, large wood deck off of the kitchen and master bedroom, and more.
This flipper stands to make $115,060 assuming they receive full asking price and pay 6 percent selling costs. Not bad at all for a little more than three months' work. This property has been on Redfin for 35 days so far.
But is this price realistic? I personally think it's completely insane to pay the $722 per square foot that this seller is asking. Could you imagine paying $4,428 a month (not including insurance and property taxes) to own this 1,245 square-foot place with a 20 percent, 30-year fixed loan at 6.25 percent? I sure couldn't. Granted, it's in a nice part of Costa Mesa that's close to Newport Beach Country Club.
Let's check the competition:
Just around the bend is 2644 Riverside Dr. This has to be the most modest-looking $1,199,000 house I've ever seen. Click the link if you want to see for yourself. The property has one extra bedroom (4 bed/2 bath) and is 1,750 square feet. For the life of me, I cannot fathom anyone who would willingly spend this much money for this 57-year-old house.
2680 Redlands is newly on the market. It's a 3 bed/1 bath, 1,200 square foot, for sale at $839,000. Hmm....would you pay $60,000 for one extra bathroom and 45 square feet?
2651 Redlands is also for sale. Asking price is $950,000 for 3 beds, 2 baths and 1,800 square feet. Nothing too special here, which might help explain why the house has been on Redfin for 145 days.
So far, things don't look all that bad for the above flipper, since their price seems fairly competitive with these two. Nearby condos, by the way, are asking in the high $500,000s. They are newer (around 25-30 years old) and larger than the flippers' property. Does the fact that the flippers' smaller house is a single family home justify a $300,000 premium in this new market?
My alternative selection:
You can live a short distance away at 2418 University Drive, get a "tricked out" (I'm not making this up, click on the address to see the listing) property with a lot of great features in a Newport Beach ZIP code (if you're into that thing), but most importantly pay $250,000 less for a larger single family house with the same number of bedrooms and bathrooms.
Life's all about choices.
Monday, July 02, 2007
Out of whack
Just a few days ago, we profiled some of the falling prices out in Santa Ana. Just to show that, yet again, some sellers out there are either completely out of whack or in total denial, here are two houses that are so close to each other, they're virtually around the block from one another.
The two green symbols on this map show the locations of the two houses. The house that's for sale that is in the lower left of this photo is 2717 W Anahurst Pl, 92704.
The house on the upper right of this map is 2706 Saint Gertrude Pl, 92704.
Let's take these one at a time:
2717 W Anahurst Pl, 92704
Size: 3 beds, 2 baths, 1,852 sq ft (built 1958)
MLS: P556726 (163 days on Redfin)
Current price: $539,000 on ZipRealty and a real estate agent's MLS-based search; $500,000 on Redfin
Sales history: 9/6/2006: $600,000
ZipRealty price history: Price Reduced: 02/07/07 -- $619,000 to $600,000
Price Reduced: 02/12/07 -- $600,000 to $589,000
Price Reduced: 05/11/07 -- $589,000 to $569,000
Price Reduced: 05/17/07 -- $569,000 to $559,000
Price Reduced: 06/12/07 -- $559,000 to $549,000
Price Reduced: 06/21/07 -- $549,000 to $539,000
From listing: Sellers very motivated
My comments: I would think that the sellers would be pretty motivated considering this place is bleeding red ink. If, and this is a real if, they sold at the higher $539,000 price ZipRealty is displaying, there would be a $93,340 loss, assuming 6 percent selling costs. This place is down to $291 a square foot if we consider again the higher ZipRealty price. Bottom line is that these sellers bought at the absolute wrong time, and are paying the price. This place has sat on the market since January and, even after six price reductions, nobody wants it.
So given what we've learned from that house, this next place is an absolute joke:
2706 Saint Gertrude Pl, 92704
Size: 3 beds, 1 bath, 1,066 sq feet (built 1958- same year)
MLS: P564956 (115 days on Redfin)
Current price: $620,000
Sales history: 08/01/2006: $550,000
ZipRealty price history: NO REDUCTIONS
From listing: Great location!!! Beautiful and affordable home in south santa ana, 3 beb, dinning room, beautiful curb appeal, nice porch for those warm days, beautiful coverred patio, a lots up grade, gated in a quiet neighborhood, close to parks, schools and malls.
My comments: Get out of freaking town. In fact, go ahead and take a rocket to the moon, because this level of insanity reaches new heights. Here is a rundown of the absurdity:
- This house is about 42 percent smaller than the first house and has one fewer bedroom, yet they are asking $81,000 more than the higher ZipRealty price of the first. In fact, this place's price per square foot is a laughable $582. As a reference, this place in Newport Beach - in a much more prestigious ZIP code - sold for about $419 per square foot this April.
- Again, these houses were built in the same year and are so close together that it's probably safe to assume that they were part of the same development. How do you justify selling a smaller model for that much more?
- This place has been languishing on the market since March, yet no visible price reductions. There is only one photo, of the exterior, that appears in ZipRealty and Redfin (though it is possible that not all the MLS photos are making it over. I checked a realtor's MLS search and it also only turned up one photo).
- The first sellers are resigned to take a huge loss after nine months of ownership and still can't unload their property, but this seller somehow thinks that meanwhile, their house appreciated $70,000 in 11 months.
- To quote the listing: "Beautiful and affordable..." Flat-out lie. This property was listed after the first one, meaning this agent would have had to (if they were at all competent) know what the first was price at before recommending a list price, and while this house is not at all affordable in general relative to the area's median income, it's also unnecessarily expensive compared to the property for sale right around the corner. And in terms of beauty, the first has more curb appeal, in my opinion.
Thursday, June 28, 2007
WARNING: Do not read while eating
Some things in life are just plain nauseating. If you've been following recent real estate trends, this little gem would most likely fall under that category.
I was watching "My House Is Worth What?" the other day - you know, the show on HGTV where a homeowner wants to know how much their house is worth, so a real estate agent comes by, notes some positive features and some drawbacks, and ultimately arrives at the price where they would list the home.
At this point, I could easily digress and rant about the things that bug me about this show. I'll save that for the end, because otherwise you'd miss this:
One of the homeowners featured on this episode lives in Los Angeles and bought in two years ago (that's right - the peak of the bubble). Her place is older - Spanish 1920s or so - and we don't know exactly what part of town it's in.
Pluses: There is a guest house on the property that she renovated and is renting out. There's also an outdoor patio that would be good for entertaining (is it just me or is that feature very overrated - sure, we would like some nice outdoor space, but just how often do we really use it?)
Minuses: No air conditioning. Washer and dryer literally within arm's reach of the sink in the kitchen, out in plain sight. Kitchen needs major work and has awful looking cabinets and counters. Floors in the kitchen should probably go, too.
She paid $550,000, and spent $25,000 renovating. So, she's in for $575,000. Trust me, it gets better.
Now she's hoping it's "worth" about $775,000 - so that way, she says, she could have a big enough down payment to trade up for a bigger and better place. This doesn't pass the smell test, and you can tell the real estate agent sensed it too - $200,000 appreciation in two years, considering we're now in a major buyer's market?
The agent then asks her: "How did you arrive at that figure?" (What he really means: What the @#$* are you thinking?)
She says: "Well, I've lived here for two years, and I heard you just add on $100,000 a year kind of thing..."
Excuse me while I hurl. This is a prime example of complete ridiculousity at work. That statement concisely sums up why we're in the situation we are now. People have been conned to believe that you can't go wrong with real estate, it always appreciates, blah, blah blah. This is one piece of the explanation as to why prices are now through the roof.
Cue the agent's nervous laugh, and joke about "Well, this is LA, right..." (What he really means: "You nut case! How can you possibly think that your house went up $100,000 each year? Good luck finding a buyer.")
He proceeds to tell her he would list it for $669,000 - still a whopping $94,000 above her costs (and she'd better try to get out now, otherwise she could be in for a surprise as the market continues its downward swing).
Despite what is in actuality very good fortune (and luck) for her, she pouts as we fade to commercial.
Thanks for reading this far. If you can stomach some ranting, then read on. If not, thanks for stopping by and I'll catch you on a later post.
If you're in the mood for more...
I'm no real estate professional, but the title of the show is a red flag. You've got a real estate agent telling someone who obviously wants to hear as high a list price as possible what they will list their house for.
How in the heck does this answer the question the title of this show poses: "My House Is Worth What?" Here's a little secret: It doesn't!
A real estate agent can have any kind of opinion they want about what they would list a house for, and that price could be not even close to real market value - because market value is what the asset would trade for in an open market, not what an agent thinks it could.
Even in the booming 2005 market, only 37 percent of those surveyed in this study reported selling their house for the full list price. That would lead me to believe that the initial listing price says little to nothing about what a house is really worth in the open market.
Two other (of the many) disturbing features of this show include:
- More often than not, the homeowner is not really looking to sell, but to pull equity. On this same episode, a couple was disappointed that their home was only "appraised" at about $150,000 over what they paid because that somehow wouldn't give them enough to finance their dream wedding. That's right - they wanted to pull all their equity out of the house, in a declining market, to buy a ring and spend the rest on a lavish wedding.
- Episodes tend to be fraught with misleading information about what fixing flaws and upgrading your house will do to its value. Again, I'm no expert, but when the real estate agents say things like, "If you do this, you'll get all your money back and more," could make someone believe that just by throwing money at their house, they are increasing the value. Umm...not necessarily. What I would take away from some of these suggestions is more that some upgrades will be necessary because otherwise, buyers will probably be turned off.
- In earlier episodes, real estate agents were (not surprisingly) very upbeat about the real estate market and usually didn't dwell on flaws that would certainly turn sane buyers off (functionally obsolete things like 3 bedrooms, 1 bath). I like how the agents in recent episodes tend to be pretty frank about current conditions - they say right off the bat that we're in a buyer's market, and sellers are going to have to be very competitive to get their place sold. The more people that wake up to the truth, the better.
- It's good to see some people in complete denial face reality. Of course you're going to attach sentimental value to your house, but that don't mean squat to anyone else. The principle of substitution says no buyer will pay more for a house when they can get an equally as good one (in their eyes) for the same price.
Monday, June 25, 2007
Denial in action
The Associated Press came out with an article today that said existing home sales have now hit a four-year low.
Here's an interesting quote from the story:
“The only way we are going to chip away at this Mount Everest-sized pile of inventory is by price cuts and so far, sellers haven’t been aggressive enough,” said Mike Larson, a real estate analyst at Weiss Research. “Don’t look for a lasting bottom in the housing market anytime soon.”
No way! Do you think some sellers are still delusional enough to believe they can profit from buying at the peak of the bubble and then turning around and trying and sell their house to some fool who hasn't been following the recent real estate dismemberment?
Consider the following two examples...
130 Lohrum Lane, Anaheim Hills, Calif., 92807
Current price: $594,000
Redfin sales history:
| Date | Price | Appreciation |
| 04/17/2007 | $560,230 | |
| 06/06/2005 | $600,000 |