I can always count on my good buddy, Reno Ignoramus, for many of the fabulous links you find on this site. Here’s a guy on Craigslist looking to auction his town home this Saturday. I don’t know if he’s using a professional auction house or doing it himself, but that opening minimum bid of $295K isn’t exactly an amazing deal. Sure, maybe it appraised higher, but in this market appraisals can’t be trusted because they depend on old data.
For any of my clients thinking of bidding on this fine opportunity, here’s a little background info. This town home was originally listed on 2/14/06 for $369,900 by a discount broker in Vegas who simply charges a nominal flat fee to put it on our MLS and leaves it to the owner to do everything else. That works well if you price the home to sell, but most owners who go this route list at their dream-on price and fail to sell the home.
When the listing was withdrawn on 6/11/06, the price had gone down to $365K. The owners promptly relisted with a local agent who talked them into lowering the price to $350K. But, despite doing a nice virtual tour on the internet, offering $3000 toward buyer closing costs and a week at the owner’s personal condo in Kauai to the selling agent, the listing expired on 8/27/06 at $343,500.
Too bad they didn’t price their condo competitively to begin with… only four in the complex have sold since January 7 (that’s about one about every other month) and only one of their exact floor plan sold in March. Listed for $339,900 and sold for $335,000 with pretty much the same view, it was the better deal. And there are three others just like his for sale from $320,000-$325,900… so yeah, I guess $295K is cheaper. But is that really a big wow for you buyers out there?
I don’t remember if I’ve shown buyers this exact unit (I may not have because I usually skip overpriced properties in favor of those that are good values), but I’ve shown those units a few times in the past six months. And though the buyers usually like them, in the end they almost always decide to pay just a little bit more to get a real house with a real yard.
Now these crafty owners, who live in Oregon and paid $219,279 for this property on 11/17/03, are trying the auction method, and who knows? They may succeed. But if it were me, I would lower that opening bid to $250K. Then it might actually be a pretty good deal, and they’d still walk away with something (unless the property was empty the whole time and the mortgage payments a money drain). If that doesn’t work, I suggest they list it for $275K and offer the buyer broker 4%. That should get it sold in no time…
By the way, if anyone picks up this condo for a great price because of all this valuable free information, I would love it if you sent me a gift certificate for dinner at The Washoe. Now that the Rib Cook Off is over, I could use a good steak… 😉
Data courtesty NNRMLS
gotlots
This provides an excellent opportunity to see what is happening in our market. Excellent because we have the chance to compare two essentially identical properties.
So a unit identical to this one sold in March for $335K.
Today, you suggest listing this one for $275K. Fair enough. Say an offer is received for 97% of asking, or $266,750.
The person who bought in March will have seen the value of his property decline $68,250 in 6 months.
That is a decline in value of 20% in 6 months.
Thank you for this illustration of my point. If one seeks to lock in declining value in Reno, there has never been a better time to buy.
Reno Ignoramus
Thanks, Diane, for the info about this property.
Let’s hope that the buyer of the identical property in March did not purchase with a nothing down, interest only loan. If he did, he now owes the bank about $60,000 or more than his house is worth.
Heck, even if he put 10% down, he now owes the bank about $30,000 or more than his house is worth.
Leverage is so great when values are rising, and so ugly when values are falling.
And consider this: If the value of the property is now $266,000, from today it would have to appreciate 26% just to get back to the original purchase price of $335,000.
What are the chances of ANYTHING appreciating 26% in our market over the next few years?
Closing note: I do not post here to flame anybody. There is a serious amount of misinformation still being put out by the realtorindustry as a whole, present company excepted. I post here to offer a perspective to potential buyers that they will not find on the typical realtor shill website. I thank you for your willingness to maintain a blog where people might actually get a more complete picture.
Diane Cohn
You know, in all fairness this place could sell for $295K, or it may sell for $310K or even $335K. I can’t truly predict what will happen here… It depends on what a buyer thinks it’s worth. That $275K I threw out was a number I think would create excitement in a crowded marketplace and get the job done quickly. It’s nothing but an educated guess.
Reno Ignoramus
“The housing market is looking sicker by the day. Economist Ian Sheperdson said that the housing market is so far gone that ‘it’s not rescuable anymore. The housing market is beyond the control of the Fed.’ He compared it to a football game played on a mountaintop. Once the football goes off the edge, he said, it doesn’t stop until it reaches the very bottom.”
“Even the homebuilders, long an optimistic bunch, are all but throwing in the towel on the current market’s condition. ‘We’re running our business today as if we’re in a prolonged downturn’ said CEO Ara Hovnanian of Hovnanian Homebuilders.”
Businessweek Online
September 9, 2006
Reno Ignoramus
“‘The market is very weak and may be staring at a hard landing’, said Paul Puryear, managing director of Raymond James & Assoc. ‘Housing is the key driver in the economy, and consumers are in for some bad news in regards to the value of their homes.'”
Bloomberg.com
September 9, 2006
Reno Ignoramus
“Paul krugman, Professor of Economics at Princeton University says “I think we are looking at a housing cycle that we’ve never seen.”
“If history is any guide, housing prices have got a long way to fall and the housing industry is going to go through a long drought.”
“This is scary.”
Bloomberg
9/8/06
Reno Ignoramus
“Mortgage rates, shmortgage rates. No one’s paying attention to the cost of borrowing money these days because it seems trivial next to the risk of losing money by buying high and selling low-catching a falling knife, in the Wall Street vernacular.”
Businessweek Online
September 8, 2006
Kevin
“It was a dark and stormy night; the rain fell in torrents–except at occasional intervals, when it was checked by a violent gust of wind which swept up the streets (for it is in London that our scene lies), rattling along the housetops, and fiercely agitating the scanty flame of the lamps that struggled against the darkness.”
–Edward George Bulwer-Lytton, ‘Paul Clifford’
1830
Elaine Hirt
How did this auction turn out? Anyone know?
Quite curious.