What does it take to sell a place in this market?

[SD Realtor]

Seattle Relo there are some good ideas posted here. My mother in law lives with us but she is in good shape and takes care of the kids. She drives my wife alot crazier then myself.

Anyways you should try to investigate as many of the options as possible, attempt to come up with the different cash flow scenarios, and then see what fits you best.

Option 1 – Senior living. There are several senior living homes in San Diego, including RB and Escondido I believe that are both independent and assisted living. The difference has to do with the shape your mom is in. Both of these types generally have meal plans as well. Again, you need to dig around to find out more about them, but you need to do this legwork to make sure you have made a sound decision.

Option 2 – Rent out your home while you all move into a bigger home to rent. This may not be bad as well. Go to Craigslist and see what homes rent for that are comparable to yours in RB. Actually the rental market is doing okay right now. This will help your taxes somewhat because your rental property allows deductions that you cannot have when it is your primary. You also have depreciation expense. This is the good. The bad is that when you do sell the home, if you have not lived in it 2 of the past 5 years you cannot claim it as your primary residence to get the tax exclusion that is attained when you sell a primary residence. Now this exercise shall include pricing out what your home would rent for AND the new home you will rent. Then see where you come out cash flow wise. Unfortunately I am a renter and I own rental properties and when it all comes down to it, that pure loss of being able to write off the primary mortgage interest HURTS. Yes when you own a rental you get to depreciate the property and you get to expense HOA, Insurance, and basically EVERY expense to maintain the property. However it all gets offset by the rental income so just prepare for that.

Option 3 – Selling the house, or both the homes… Well all I can say is yes it is a brutal market out there. My advice is that if you do sell price that sucker to the bone and pretty it up nice. Run the numbers on the sale. Your net will be the sales price – commissions (to both listing agent and buyers agent) – “normal” sellers side closing costs (estimate 1% for a worst case here… usually they are a tad less) – any prepayment penalties – any credits or repairs that the buyer may ask for (sounds like the home is in good condition but beware as most buyers are now asking for a little moola for their own closing costs) – normal prorated mortgage interest and property taxes – your balance.

Another thing here… What were your long term intentions with the home? Were you guys intending to hold it a long time? Enough to ride out the storm? I recalled when you first posted we had a long debate on whether it would be better for you to just suck it up and sell now or sit tight and I forgot what the conclusion was.

In terms of the price drops I would not think of it in those terms. Just make sure that whoever you talk to does a very sound comp analysis. Look at where the numbers lie and see if it will work for you financially given all the nicks and cuts that come from the sales price.

SD Realtor

[losgatos200]

Is she trailer trash or does she have an education ?

Send your mom to work !

[LookoutBelow]

Hahahahahaaa….COMPS ?….COMPS MY ASS !

 Comps mean NOTHING in this new arena ! Nobody is interested in what somebody paid for it back in the "Salad Day's" of irrational exuberance ! THAT MEANS NOTHING TODAY.

Think 2.5-3.5X annual earnings MAX ! 

What is a house worth ?:

EXACTLY what somebody is willing to pay for it, and what they can get FINANCED for…THAT may be TWO SEPARATE things now 

 This lesson will come with a LOT OF PAIN FOR THE IGNORANT ! 

[seattle-relo]

SD R: Thanks for the reminder of the rent being taxable income – I had forgot about that when considering different scenarios.

You were remembering my post back in May when we were thinking about getting out of our mistake of buying a home in this market and cutting our losses sooner than later. After a lot (and I mean A LOT) of discussion my husband and I had decided to just stay put in our home and ride out the market. We looked at the numbers (with his handy dandy spreadsheet) and it seemed to make the most sense if homes went down another 35% (which I am sure they will). But after all the stressors of relocating, his new “big shot job”, and some medical issues we as a family have been dealing with, we decided that the added stress of trying to sell at a loss was just too much. But now with my mom’s issues creeping up on us, we are reconsidering the idea of waiting out the market and selling now. I’m still at a loss about what we should do with her. Some people have asked what’s up with her – basically she has many small medical issues related to her weight that makes it difficult for her to work all day, but the medical issues probably don’t qualify as a disability. Plus she has very little skills so getting a job is really hard for her, and then for some reason she keeps getting fired. (Argh!) Someone asked if she was trailer trash, and because she’s my mom I don’t want to rip on her too much, but I’ll just say she makes Rosanne (remember the Rosanne Show) look articulate and well mannered. Get the picture?

[stockstradr]

A quick story for those thinking of selling now. A friend of mine lives in Minnesota, a nice quiet midwestern state many believed would be least affected. He put his house up for sale 9 months ago. He had to. He accepted a job offer taking him to the Bay Area.

Back then I told him, “Sell NOW at any price you can get.”

But he chased the market down. What do you think he said to me last week?

He said that 6-9 months ago the market may not have been great, but at least you could sell a house for a low but reasonable price.

He wishes he had sold. Since then he has seen the housing market fall off a CLIFF.

He says “the real estate market is completely locked up, frozen with no signs of life because people cannot get loans. Prices are dropping so fast the appraisers don’t know what to do, and the loan officers are SCARED to approve anything.”

IF you can find a comp that sold in the last 30-days, you price 10% under that and still NO OFFERS, or lowball offers that fall through because nobody can get a mortgage approved.

My friend emphasized that VERY FEW people with good credit are house hunting (those with solid credit and down payments already own a home, or are smart enough to have sold and switched to renting)

That’s the housing market up in quiet sleepy Minnesota. California is much worse.

It is too late to be thinking about selling. We are too deep now into this housing crash. The next 36 months are going to see the worst housing hell in over fifty years.

[(former)FormerSanDiegan]

Thanks for the reminder of the rent being taxable income – I had forgot about that when considering different scenarios.

CAREFUL. Rent is only taxable to the extent that it exceeds your costs. In your case you will surely have a tax loss, which will adds to what you can deduct assuming you make less than 150K per year. These costs include Mortgage interest, Property Taxes, Insurance, Depreciation, maintenance, property management (if used), etc. Depreciation is about 3.6% of the value of the structure at the time you acquired it (land not included). If the structure was worth 250K, this is a paper (tax) loss of ~ 9000 per year.
You can deduct up to 25K of these losses per year against your income if you make under 100K. This maximum amount is reduced by 1$ for every 2$ you make aver 100K.

You will surely not have any taxable gain. And will likely have a significant additional tax deduction beyond what you currently have.

[taz]

My 70 year old mother recently moved into a senior (rent controlled) apartment. If you are considering that option for your mother, I suggest you scout out and identify SEVERAL acceptable locations/facilities and get her name on their waiting lists NOW! My mom and I discovered that the demand for these places is high and accordingly the wait list is LONG, it took close to 2 YEARS for my mom to get her place.

[SD Realtor]

Seattle Relo –

Another thing you may want to consider is getting a CNA to visit here. A typical CNA is about 22-25 an hour from a certified agency. There is usually a 4 hour minimum and a CNA can prepare meals, light housekeeping, run errands, etc. They cannot administer medicine (say insulin for instance) nor can they populate a pillbox perhaps. They can remind your mom to take here medication.

Anyways you can also go to craigslist and advertise for a caregiver/companion. You will get a better price but they will not be a certified.

So perhaps you can have the CNA visit her a little bit each week. Or look into a companion.

SD Realtor

[SD Realtor]

Lookoutbelow.

Yes comps are what you have to look at to establish a starting point. Then if you are motivated to sell your home you price below them. How far below is the only question. Also determining how nice your competition is, is another important factor.

I don’t think Settle Relo or anyone else knows what you earn so how would they price a home at 2.5-3.5x what you earn.

SD Realtor

[SD Realtor]

FSD thanks for clarification on the taxes. I thought it was implied in my post but good job explaining it… Also to add, you always must take the depreciation expense. Even if you do not, the IRS will recapture it regardless of whether you did or not.

ar

SD Realtor

[NotCranky]

As far as comps go. I would check recent pendings. I think it is safe to say that the majority of them went into escrow for a ballpark estimate of 5% off list price . You have to start somewhere.(In thi market list price has oftern been reduced a few times before an escrow) If I were motivated to sell something I would start a little lower than the best pending comp but be willing to get to 5% below a pendings based comp after a few weeks and work from there. Probably take something like 3 percent off a month later. That is very competetive. I would adjust according to the number of sales and other feedback from the sub market and also traffic to the subject property.

[SD Realtor]

Actually when I refer to comps I look at several things. To me comps is inclusive of an entire analysis of the market to help you price the home. The factors to analyze include

-recent solds
-current pendings
-current active listings for sale
-recent cancelled, expireds, withdrawns
-going over and looking at the current active listings you are competing against
-your own motivation level to sell

Analysis of all of this data is important. I don’t like to say list at x% above or below comps because it really depends on the situation. If there is a 10:1 active to pending ratio then you may need to go well below the current comps of recent pendings to get activity. In markets like this it is really tough. Also many people really lean towards lets price it at this price now and we will lower it later. That strategy to me is pretty much a sure fire way to end up chasing the market down.

Unfortunately there are agents out there who will still encourage pricing that fits in with the sellers opinions or thoughts rather then what the data and market conditions dictate. That is sad but they end up getting the listings and then price adjusting later.

SD Realtor

[patientlywaiting]

sdrealtor, I think it’s smart to indulge the sellers and get them to adjust their asking later.

You need to slowly ease people into coming to terms with then accepting their situation. Shock therapy is painful and doesn’t work.

If I recall Seattle Relo is a therapist and might agree with that.

[NotCranky]

I don’t like to say list at x% above or below comps because it really depends on the situation.

“I would adjust according to the number of sales and other feedback from the sub market and also traffic to the subject property.”
I think that covers the other bases you reference MR. One Upper ;).

In my account I already adjusted for the fact that the seller is motivated. In this market If I were motivated closed sales matter to me less than pendings (depending on the activity). Of course to make a superstar presentaion to a seller of unknown motivation you might have to bring what they were looking for …closed sales comps.

I think getting something sold and pleasing deluded clients are two different topics. I am not doing therapy on anybody on this issue especially after the sign is in the front yard.

[SD Realtor]

Your answer made me chuckle patiently waiting… yours to rus but rus… anyways I think the large brokerages have the time and money to serve people in that manner. Someone like me who carries much lower overhead and doesn’t have the time to deal with people who cannot seperate emotion from fact, it makes more sense to cut bait then to fish. Which is pretty much what the mainstream does… fish… then chase the market down… then take the listing off… then repeat in the ensuing spring.

SD Realtor

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