Finally, A House Sells In My Neighborhood!

[Bugs]

We treat it almost casually: “40k below an offer they turned down a few months ago.”

What a difference a year makes. For someone who needs to sell to “lose” $40,000 at this point of the downcycle is a huge loss. Just to put it into perspective, that $40k could represent 6 months of wages for a mid-career professional in this region. That $40k is equal in amount to the cumulative losses suffered during the entire 90-95 meltdown for an entry level tract home in the N.County area during that period. Many wage earners in this region could not save $40,000 if their life depended on it.

People in RE and related businesses get so accustomed to dealing with big numbers all the time that I think it’s easy to lose perspective of what those numbers represent. We’re talking about the same dollars we use to balance our checkbooks and pay our groceries. This ain’t Monopoly money, it’s the real thing.

[PD]

Those same people ended up taking an offer that was over 15% less than the peak. The difference in dollars between the peak and what they sold for equates to one year of his salary.

[JES]

When you figure out the loss, do you also take into account the commision arrangement that someone has with their realtor, or no realtor? Someone who only has to pay $5,000 in closing costs can sell at a much lower price and still clear the same $$ as someone who spends $30,000 and sells at a higher price.

In this first example, what was the total commision paid? IMO in this market a wise strategy would be to get a realtor who will sell it for 2%, with no additional charges if you find the buyer. On a $700,000 home this is a $15,000 savings in realtor fees which gives you much more leeway than your neighbor who will pay 5.5-6% in fees. Right off the bat you can ask 690k instead of 700, a 10k discount for the buyer and a 5k break for you.

[PD]

I did not include fees in my example. I do not know how much they paid in commission but I think they had a traditional realtor.

[Steve Beebo]

TP:

The property you referenced on Amberly – it looks like a little bit of a fixer-upper to me – but if you went inside it you would know better. It was listed as a trustees’ sale, with “lots of potential”. It seems that the agent / sellers were absolute idiots when they tried to list it at $600,000, or even anywhere in the 500’s. The one that sold recently at $515,000 on the same street was the same two bedroom model, and it looks to me from the pictures on the MLS that it had a lot more market appeal.

The sale price at $415,000 looks to be well below the current market value. This property is in the San Carlos / Del Cerro area, and there are recent sales and pending sales in the inferior and nearby Allied Gardens area in the mid 400’s.

Is it possible that there was something seriosly wrong with the property? There are some properties nearby with cracked slab problems, especially on Margerum Ave.

[theplayers]

Steve, I agree, they priced it way too high to start with.

Yes, the one that sold for $515,000 had much more curb appeal, was landscaped well, with a well manicured healthy green lawn. I never was able to see the inside, so I can’t comment on that.

The $415,000 house really wasn’t in bad shape, it wasn’t in disrepair, but it could use some updating. I’d say it was about average, but it did not appear as appealing as the other one (that’s why I don’t understand why the realtor and/or seller didn’t immediately drop their price alot when they saw the other nicer house sell for $515,000). It needs some landscaping work, mostly some clearing away of stuff. It is a corner lot. Inside, it was clean, had just been painted, seemed to be in decent shape. Can’t remember what condition the carpet or floors were in. The kitchen was in OK shape, but had the original cabinets, it could be updated (it was built in the early 70’s). Everything in the bathroom was original too. I seem to recall that the seller said her aunt had lived in it since it was new. I don’t know if there were any other problems, such as a cracked slab. The realtor didn’t mention any, and I never saw anything mentioned in the MLS descriptions.

I think the much lower sales price they ended up with is a combination of factors. One, timing, they should have lowered their price earlier, the market was changing, and not in their favor. Two, in the market we have now, with less buyers and more inventory to choose from, it seems that the homes that are in the best shape will sell quicker and easier. Three, it’s a two bed/two bath, only about 1100 sq feet.

[carlislematthew]

We treat it almost casually: “40k below an offer they turned down a few months ago.”

I would say that the importance of this “loss” for the particular seller is related to how much they came out with, when all things are taken into account. If these particular owners bought the house for 400K a few years back and then sold for 760 and not 800K, then they didn’t “lose” money, then simply didn’t make as much as they could have.

In that situation, they have no less actual money than at any point in time. They *could* have made more, but that’s not the same as making a loss.

If, however, they bought the house for 700K last year, then they could very well have lost money on it! Buying a stock for $10, neglecting to sell at $20, then finally selling at $15 is a $5 per share *gain*.

I still agree that the numbers are big and are not to be taken lightly..

[Chrispy]

One of my favorite adages is – “You don’t make money until you sell.” I’ve used this a few times when people bragged about how much money their house was worth. It’s all vapor until someone puts the cash down.

Works with stock market prices too – quickly quells the “XYZ is up 20% since I bought it” comments heard at the water cooler.

[PD]

I disagree with you a little bit about the loss. If you think you made 200k on your house and make financial decisions based on an expected gain but end up only making 100k, it is a psychological loss. Looking at it like an accountant does not lessen the impact of 100k evaporating.

[Bugs]

My use of the word [“loss”] did include [“”] for a reason.

[Author]

Posts