Guy and I are at the annual NAR convention in Las Vegas for the rest of the week, so forgive us if postings are light. Hopefully we won’t come back with alien heads spewing forth all your favorite little pearls of Realtor wisdom, like, now is the perfect time to buy, the media is prolonging the downturn and… Lindie, RI, what am I forgetting? I haven’t been here long enough to be fully assimilated. 🙂
I'm Your Guy!
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Move to Reno?
Diane, you and Guy have a wonderful NAR convention. Be sure to drink plenty of the kool-aide. Don’t say anything stupid like “Have you done any rent v. own analysis lately?” or “Who in the world in their right mind would pay more than $130 a sqf for a stucco tract home?” If you have time, check with some of the locals about the current Las Vegas housing market and their expectations for 2008 and beyond.
Have a good trip!!
Reno Ignoramus
Diane,
Since you asked, allow me to prepare your next post after returning from the NAR rally. I offer the following for you:
“Well everybody, I’m back from Vegas and the NAR annual convention. There is so much to report I don’t know where to begin. First, let me say how totally cool it was to be surrounded by 300,000 rare, elite, and highly trained colleagues. It makes me proud to wear the @REALTOR insignia. It’s not like just anybody can become a REALTOR you know. It takes up to 6 rigorous weeks of study. And then, that has to be followed by as much a month of residency, er,I mean, Internship, well, really I mean you have to follow somebody else around for a month. All that before one can wear the REALTOR badge. It just gives me shivers.
The highlight was the keynote presentation by His Most High Emminence Lawrence Yun. His Most High Emminence made it clear that the real estate market all across America is in great shape. In fact, did you all know that this year, 2007, shapes up to be the Fifth best year in U.S. real estate history, going all the way back to medeival times? Well, it is. In further fact, some markets, like South Florida, are posed to go up 140% in just the next 5 years.
So what’s this all mean for us here in Reno-Sparks? Well, as you know, I never give advice on this blog, but I think the chances are substantial that I will sell the $800,000 barn in the next couple of months. And for full price. AND, I would also say that the chances are terrific that I will sell the Caughlin House, currently listed for $3.3 million, for at least that much. May well get more than a full price offer. Why do I say that? Well, His Most High Emminence, who is did you all know, an internationally renown economist, predicted that the price of gas will rise. Isn’t that awesome? This will cause fewer cars on the road, specifically at the intersection of McCarran and Mayberrywhich is a stone’s throw from the Caughlin House. In all likelihood, the number of vehicles passing through that intersection will drop to something less than 50,000 a day, thus causing the value of the property to skyrocket.
It is these kinds of insight one gets in the presence of His Most High Emminence that make the NAR dues just so worth the price.
I could go on and on. But I don’t want this post to run on forever, and I want to save something for Guy to say about his moments of nirvana in the presence of His Most High Emminence. It’s just such a subjective thing, you know, being in the presence of Deity. I don’t want to spoil Guy’s thunder.
So let me just close with the some things you can take to the bank. I do not profess now to be actually channelling His Most High Emmince, just reporting to you the Truth:
1. There has never been a better time to buy in Reno.
2.You won’t ever lose money on a house in Reno.
3. The price of a house in Reno won’t ever go down.
4. It is different here.
5. Truly, sayeth his Most High Emminence, everybody wants to live here.
6. Prices are at the bottom, or so near to the bottom that only the angels surrounding His Most High emmince can tell, that you better buy now or risk being priced out forever.
Namaste,
Diane.
EyesWideOpen
Hey RI,
You are one mean SOB. Have you nothing better to do with your time? Did you run out of flies to de-wing? Good grief. Get a life…
BanteringBear
“You are one mean SOB. Have you nothing better to do with your time? Did you run out of flies to de-wing? Good grief. Get a life…”
I think you’re overreacting quite a bit. RI has never come off as mean, and I believe he has a fine relationship with Diane, so lighten up and laugh a bit. You’re reading too much into the post.
SkrapGuy
There has been a friendly banter bewteen RI and Diane on this blig for as long as I remember. That’s why Diane invited RI’s comment I suspect. I doubt Diane takes this seriously, and expect she may even return the banter to RI.
Lindie
Remember when I posted two weeks ago about the house at 1 Newlands Circle? This is the house that went up in price 30% in one year between 2004 and 2005, and sold 26 months ago for $800,000. It came on the market two weeks ago at $799,000. It has already dropped to $774, 900.
If this house continues to drop in price at the rate of $25,000 every two weeks, in about 6 months it might be a sensible purchase.
DERRICK
It’s quite apparent some posters on here have WAY to much time on their hands!
Realist
NAR in the sky with diamonds!
tex
Hey you all,
First off I want to introduce myself. I am a texan and a former renoite who bought in 2003 and sold in late 2004 for a hefty profit of 70k in old sw reno. I moved back home to texas and well, my old boss wants me back so, if he meets my price, I will be moving back to Reno. I have been following the market and I am very happy to see that I can almost buy at the price I sold at when I left Reno. In fact, my old home was on the market recently for 375k (I sold it for 350K back in november of 2004. Of Course I bought it in december of 2003 for 275K so I wasn’t exactly looking forward to spending an extra 100k to rebuy my old home. H owever, let me say that given everything I know about the market today, I would not buy my old home for 275K today. I can buy a short sale property for about 375K that is in a neighborhood of 600k comparables. If my old boss should accept my proposed compensation plan, than I will be pursuiing this type of opportunity in the very near future. Probably in March or April when homweowners and bankers are starving after a particularly harsh winter. I will be needing the services of a buyers agent that can actually serve a buyers interests. While many of these realtors purport to do so, being a former realtor myself, I know that few offer any value to a buyer. In which case, one has to wonder, why bother with a realtor at all? My Mentor, as a realtor ( and mind you, I was rookie of the year at a well known national firm with over 90 realtors in that one branch)taught me that if you can’t offer any true benefits to buyers, (ie. mortgage pricing, inspectors, title companies that are reasonable,) then perhaps you ought not be representing yourself as a buyers agent. You risk too much liability and you offer too little to your cleint. Needless to say, when my family needed a realtor, I referred them to her. And needless to say if and when my old boss meets my price, she will, automatically have my inner city, double lot property, less than 2 miles from downtown, in an up and coming subdivision, with lots of new high end construction,for a listing. Of Course I will probably throw her an extra bone in the form of a referral fee for a buyers agent in Reno. But who knows? I know some reno realtors that have impressed me enough that perhapsI do not need to use a referral. I can honestly say that Diane and Guy are two realtors I would seriously consider. My only hesitatation is that I do not know what they offer to a buyer that is a truly bankable benefit. My mentor offers her husband as a buyers agent and I do know he was known as a deal killer when he worked as a home inspector. I do know that for me to get excited about working with an agent, I will need to know, without a shadow of doubt, that they are working for me. To get me the very best deal on the property, as well as the best inpections, and the best financing, and the best title company pricing. I suppose i have been spoiled by the very finest agent on the market bar non. She taught me the finest ethics I have ever known in real estate. BTW her name is Betty Besemer and she is know as “the Bez” which she is. If anyone can refer a fine buyers agent to me that would be much appreciated. I will say that most agents would not risk the critisism that Diane and Guy risk and for that, I will automatically need to include them in my search for the perfect buyers agent in Reno.
Best regards,
The Texan
Reno Ignoramus
Well, it finally sold.
1900 Russell Pointe Ct. in Somersett.
Purchased on 9/26/05 for $1,065,800.
Sold on 10/29/07 for $775,000.
Total loss: $290,800 or 27%.
Add in the cost of carrying this “never been lived in” flip gone really bad, for 25 months, and this misadventure is well over a $400,000 loss.
“You can never lose money buying a house in Reno.”
smarten
Just curious RI, do you think $775K for Russell Point is too much given your market outlook for the next 8 months – year? And if so, what would you think to be a “good deal” [according to Michelle speak] on a similar property pricewise? Thanks!
MikeZ
RE: “Purchased on 9/26/05 for $1,065,800. Sold on 10/29/07 for $775,000.”
Oh. My. Now THAT’S a haircut.
Perry
Hi Smarten,
I think $775k was too much for that house on Russell Point. If I did the math right I think that comes out to $254sq’. I know that it’s a nice neighborhood but how much of a premium should they get over a similar house?
I’ve been watching 2779 Robb Drive in the Granite Ridge subdivision. Countywide is trying to unload this house and is chasing the market down (also look at 5595 Tappan). Robb Drive has had one price reduction already. The house is 3625sq’ for $577,900 or $159sq’. Maybe there should be a little premium for living in Somersett but $100sq’ premium. That is a lot of money. The HOA in Granite Ridge is a lot less too. I think the house in Somersett is worth $600k.
Reno Ignoramus
Smarten:
You ask a very good question. In normal times, one would be a bit inclined to say that a purchase at $290,000, and 27%, below the most recent sale looks like a pretty good deal. But I suggest these are not normal times.
A big problem in trying to evaluate the Somersett market is that there is no pre-bubble baseline. The whole development was built on the bubble. If one wants to get a sense of historical pricing for, say, Caughlin Ranch, that is possible. We can go back and see what houses there were selling for in 1997-98-99. We can’t do that with Somersett. It didn’t exist before the bubble and no part of it was untouched by the Voodoo frenzy, although the first houses built there were built before the frenzy got out of control. This house was completed and sold in 9/05. The previous owner could not have timed the top of the market better.
So not having any ability to get a historical perspective, or a sense of where prices would have been without the Voodoo fueled cheap easy money runup, I think we have to look to the probable future. The most accurate leading indicator of a market is the pendings:listings ratio.
Let’s look at the Somersett market above $400,000, which eliminates most of Sierra Canyon, which is its own special trainwreck.
Between $400K and $500K, there are 18 listings. 2 have a pending offer.
Between $500K and $600K, there are 14 listings. None have an offer.
Between $600K and $700K, there are 11 listings. 1 has an offer. (This is Diane’s “I’m killing the comps in my own neighborhood” listing).
Between $700K and $800K, there are 10 listings. None have an offer.
Between $800K and $900K, there are 7 listings. None have an offer.
Between $900K and $1 million, there are 3 listings. No offers.
Between $1 million and $2 million, there are 12 listings. None have an offer.
Over $ 2 million, there are 4 listings and none have an offer.
Out of 80 listings, 3 have an offer. That is a pending:listings ratio of 3.75:100. That is pretty dismal. By any standard, that is awful.
Above $500K, only 1 listing has an offer.
If these 3 pendings go on to actually close this month, that translates into 2.2 YEARS of Somersett inventory over $400K.
I look at these numbers and I have to conclude we are not in normal times. 2.2 YEARS of inventory is not normal for any market.
I look at 4% of the listings with an offer, 2.2 YEARS of inventory, and have to conclude that prices will fall from here. If only half of all those Somersett sellers are serious about selling, they are going to have to lower the price.
I think that this recent purchaser got 27% off an absurd out of control speculative bubble price. If this house sells in say, 25 months from now, my guess is that it will sell for less, not more, than $775K.
This is just my 02.
One final thought:
What would this house rent for? $2500 a month? More? Less? I don’t know. But if we say $2500, then this buyer paid more than 300 times rent. Is that sensible?
smarten
Thanks for the analysis RI. My question assumed that “if this house s[old] in say, 25 months from now…it w[ould] sell for less…than $775K,” I was trying to get your take on how much less?
I think a number on this blog are looking at the market and trying to determine when is the best time to pull the trigger on a purchase. In my book $775K is a pretty hefty price drop [and no, I’m NOT assuming $1M plus was EVER real value for this home]. But is it enough?
Perry opines $600K. He resorts to a straight price/square foot analysis which I DON’T think can be applied across the board in a vacuum. Notwithstanding, although $600K may very well be the market low point some number of months from now, I don’t think even Perry thinks we’re there now.
So my question is if you were looking to purchase something comparable to Russell Point, at $600K would you bite? Or really, would you bite at let’s say $675K [because none of us really know where the bottom is]? Please don’t pull a Michelle on us. You’ve rarely been shy, so tell us at what price do you think Russell Point would be a “good deal?”
As to your query: “What would this house rent for? $2500 a month? More? Less?
I think your $2,500 number is high. Remember, there are more homes for rent than there are tenants [and we’re seeing more and more higher end homes offered for rent every day]. I recall there being a new Toll Brothers 4,000 square foot Somersett home offered for rent on craigslist several months ago at a little over $2,000/month [and to my knowledge, it DIDN’T rent]. So I would say fair rental value for Russell Point [without actually seeing it] would probably be around $2,000/month.
But whether it’s $2K or $2.5K per month is really irrelevant.
As you observe and question, “this buyer paid more than 300 times rent. Is that sensible?”
As you know we’ve had this discussion several times before. When you can rent for 25%-30% of the cost to own [which continues to be the case insofar as Reno’s high end housing is concerned]; and, you’re in a declining market [as we are in Reno]; it makes no financial sense to own. Either rents need to increase, or asking prices need to drop so the rent versus own ratio is closer to 60%. The odds of Reno rents increasing in the next several years are slim. Therefore that leaves only one option; asking prices need to drop…further.
Now at a $600K sales price, assuming 10% down and a 6.25% fixed rate loan, the rent versus own ratio is about 58%. So Perry, in his own way, may ultimately turn out to be right on insofar as a “good deal” is concerned.
smarten
Don’t mean to over burden you RI, but let me ask the same question a bit differently.
A mortgage broker has offered me a first deed of trust investment against a 3BD/2BA, 1,645 square feet, 38 year old home [with probably few if any upgrades] with a “maybe” fair monthly rental value of $800-$900/month on Plata Mesa Drive in Lemmon Valley.
The appraisal [which I haven’t yet seen] pegs fair market value at $240K. Do you have an opinion as to its accuracy?
A couple of additional facts to ponder.
At a $240K fair market value, the rent versus own ratio is actually over 60% [twice as much as Russell Point].
At a $240K fair market value, the price/square foot is roughly $150.
The amount of my d/t would only be $120K which means that if there were a default which resulted in the property reverting to me, the rent versus own ratio would actually be in excess of 100%!
Finally, my interest rate would be 12% for 5 years with pre-payment penalties [six months interest on any pre-payment in excess of 20%/year] extra. In other words, these borrowers are almost guaranteed to default.
So what do you think? Should I indirectly be purchasing this property for $120K?
Reno Ignoramus
Consider something else. The house across the street from 1900 Russell Pointe is, guess what? It’s for sale. 1905 Russell Pointe currently offered at $799,000. This sold around the same time, (10/05) but 1905 sold for $735K. So how does 1900, essentially the same size as 1905, sell for $330K more? Good question. There is no doubt 1905 has the superior view. It has a pretty sweeping view of all of Somersett, while 1900 has a view of the nieghbors kitchen. So is a view worth $330K? Maybe if it’s a view of the Pacific Ocean at Big Sur, but not in Somersett, IMHO. This discrepancy just solidifies my persepective that 1900 was way, way overpriced.
My sense is that the $799K for 1905 is the “have to get” price for the current sellers. It is what they paid, plus what they upgraded, and a hope to get some of their seller’s costs. Given 2.2 YEARS of Somersett inventory, my guess is that 1905 will also take a 25% haircut from the 2005 bubble price. So maybe 1905 sells for around $550K. I would say $600K for 1900 would be an ok deal, not a “great deal.” A “great deal” on 1905 would be around $550K.
Reno Ignoramus
Iim sorry, I meant my last sentence to say that a “great deal” on 1900 would be $550K.
Reno Ignoramus
Man, I’m sorry again. The house at 1900 has the very nice view. The house at 1905 looks at the neighbors.
Have I made this all clear as mud??
BanteringBear
Call me crazy, but it is my opinion that the true value of the Russell Pointe home which just sold for $775k, is somewhere in the neighborhood of $450k. And $450k is still A LOT of money for a house in Reno, folks. Things got so out of hand, that people were throwing around the $300k figure like it was pocket change. It makes me want to retch.
In order to realistically afford a $300k home, you should be making $125k per year, at the very minimum. Now, look at local salaries, and then look at home prices. The Russell Pointe home was still horrendously overpriced. Not too long ago, $775k would have gotten you into Marin County, or Santa Barbara. This is a poorly built house on a terminally windy hill in Reno, NV that we’re talking about. Laughable.
Perry
Hi Smarten, I wasn’t suggesting that price per square foot is the sole means for evaluating the value of a house. I thought the two houses have a lot in common. They’re both zoned for McQueen, Billinghurst, and I believe Melton. Both are nicer neighborhoods and have HOA’s. I think schools matter a lot in Reno. Lennar tries to sell really nice homes at the top of Socrates but being zoned for Hug they have a hard time.
As for rents in Reno, I’m not very positive. My wife and I own a home in East Sparks that we’ve had for about 15 years. Since 2000 we’ve only been able to get $100 (10%) more per month. When it would go vacant we would try to rent it for a little more and had a hard time. It’s amazing what a difference $50 per month makes. If all we can get is about a 10% increase in 7 years why should home values have gone up any more voodoo/liar loans aside.
Reno Ignoramus
I don’t know Bear, maybe you are right. But $550K would be 50% off the Voodoo wacko frenzied price of 2005. It would be about $177 a sq. ft. Nobody buying this house is going to be a first time entry level buyer. With 20% down ($110K), the loan would be $440,000. With 30% down ($165K), the loan would be $385K. Household income should be around $150K or so. While that is more than 3 times the median household income here in Reno, it is not in any way extraordinary for doctors and lawyers and other professionals. There are a lot of professionals who have $165K to put down on a house. And, in normal times, this is the kind of house that ought to be owned by a doctor or a lawyer with a sensible loan, not a bartender with a liar loan.
stjoe
Around 1999, I bought a 1860 sq ft. house near McCarran and Manzanita. Price was approx. $277K. ($148 sq ft.) This included a $35K(?) lot premium for a unblockable view of downtown Reno. According to Zillow, the house is now worth $430K. At the peak of the bubble, around $550K
To me the unblockable view of Reno is worth every penny.
SJ
I'm Not Your Piggybank
RI, you wrote above:
“Let’s look at the Somersett market above $400,000, which eliminates most of Sierra Canyon, which is its own special trainwreck.”
Can you please explain to me what you mean by this? My husband and I want to retire to Reno — we have been going to Reno every year or two for many years and hope to move there in 2008. We never thought we would want to live in an “active-adult” community and were surprised at how our attitudes changed about this just in the past couple of years. We have no kids, so are looking for a sense of community where people look out for one another. We have talked to lots of people in many, many active adult communities, and have repeatedly been told that this is one of the main factors they were also looking for (and found) in their 55+ communities.
So, we were very interested in Sierra Canyon. Having been there a few times, we remain disappointed in their offering of models and the prices were, well….overpriced. In the past few months, they have dropped their prices up to $65,000 and are offering additional incentives. We’re still holding off….mainly because we don’t like the models. For an additional minimum 10 – 15% price drop, we could like them a little more. We have a friend who lives there who absolutely loves the community, but she says that it seems like half the houses are empty. Is that what you mean by a “train wreck?” How much more do you think they need to drop their prices to deliver a fair value? It would really spoil the beginning of our retirement if we started out buying an overpriced home that rapidly dropped in value (due to the fact that we bought into a seller’s market nearly 20 years ago, we have seen little appreciation on our current home and we definitely do not want to do that again).
Toll Brothers was going to build an active adult community — Heritage at Damonte Ranch(http://www.tollbrothers.com/homesearch/servlet/HomeSearch?app=community_description&comm_num=8826) — and the homes looked nicer than those in Sierra Canyon. However, I called them a few months ago and they said that due to the real estate situation, they were postponing starting this development till at least the Spring of 2008. Now, who knows?
Anyway, any guidance from you or other posters would be appreciated.
Tom
“…the true value of the Russell Pointe …”
Much comment has been made on this point, good analytical remarks. However, I can tell you from experience what the U.S. Tax Court would say, looking at the decisional law on valuation: “the fair market value for the subject property is what a willing buyer paid a willing seller in a recent sale that closed just prior to this hearing.”
Since there was a purchase and sale, that sets the value, and it doesn’t matter that others may think it was worth more or less. The market has spoken and that’s the only opinion that counts.
BanteringBear
While I understand your point, Tom, we are in a situation where real estate “values” are rapidly declining. A plethora of sales over the course of the past several years have not been indicative of a properties “Fair Market Value”, but rather what I like to call “Fake Market Value”. I think you would agree that, when a straw buyer is used, and there is cash back at closing, or let’s just say fraud in general (since liar loans fall into this category as well), these transactions are hardly indicative of the true value of the property.
Let’s not split hairs over terminology. It is my OPINION that the true value of Russell Pointe, no matter what the current or past transactions say, is around $450k. I base this on historical values and fundamentals, not the phony baloney transactions of the past several years. Time will tell.
Reno Ignoramus
Smarten:
I think that if you can get 12% on a $120K first on a house with a FMV of $240K you ought to look at that very seriously. If the LTV is really 50%. How much do you think houses like this one in Sun Valley are going to drop in value in the next five years? That’s really the question, isn’t it? For years and years money lenders have had the security and protection that they were loaning on an appreciating asset. Is that true now? I would say the chances are quite strong the value of this house will decline over the next 5 years, so your LTV will erode. The likelihood that this house will decline in value from $240K to $120K seems remote to me, but I am not clairvoyant. However, if BanteringBear is right, this could be a closer call.
There are other issues here, which I know you are well aware of. What do you know about the borrowers? Why are they willing to pay 12% in this interest rate environment? Is their credit so shot that hard money is all they can get? Are they likely to default and are you likely to end up foreclosing? These are not the kind of people who, facing foreclosure of their home, would take a crowbar and pull out all of the wiring and plumbing and sheetrock before they got on the midnight bus to Texas, are they?
DERRICK
You dont have to have an income of 125k/year to buy a 300k home. Especially considering most people save for years before they throw a downpayment down and get a loan.
Not to mention now days you can get the seller to pay for ALL closing costs, Every penny.
My wife And I together make roughly 6-7k/month from our jobs and investments, we Own our house that we bought in 2002, and are looking to upgrade from what we have now. We will probably try to sell our house sometime in the next 2 years, as we have 95k that we have managed to save in the last 2-3 years. by time the market hits bottom we should have MORE than enough to buy our dream house
Reno Ignoramus
Hello Piggybank,
Search the MLS for Somersett. You will observe that the first 40 listings, more or less, are almost all in Sierra Canyon. Some Village listings are there now, but most are in Sierra Canyon. Most of these listings have been languishing on the market for months. Some, if the true DOM figure was known, have been languishing over a year. Many are underwater flips gone bad. Hence, the comment from your friend that half the houses there are vacant. In addition to the MLS listings, there are about 3-4 houses in Sierra Canyon that pop up from time to time on Craigslist.
Then there is Pulte Del Webb continuing to build on. And on. And on. Pulte, as you state, has been dropping prices on the new inventory, which puts prsssure on the resale inventory. It’s a spiral downward. Who can go the lowest? I’ll put my money on Pulte. I don’t see how Joe Sixpack, Sr. (after all, it a 55 and over location right?) can ever win a race to the bottom with Pulte. Pulte will build on until it makes $100 profit on a house. In the process, the resale market there will be devastated.
Just my 02.
smarten
I just don’t understand this “Derrick” person.
He has told us he’s 28 years old, and that he made MILLIONS when a family business was acquired by a public company. He brags that by moving to Nevada he saved $250K just in California income taxes [sometime ago I went through the calculations and our friend Derrick had to have had a taxable income of more than $1M annually in order to have saved $250K in state income taxes over three years]. He tells us he was paying over $8K annually in California ad valorem real property taxes [meaning his home must have been assessed some years ago at about $650K or more].
Now Derrick tells us he AND his wife have a combined income of about $75K [plus/minus] annually and he wants to “move up” from his $275K or so [remember, Derrick would sell it for $325K (but there aren’t any takers)] Spanish Springs home he/his wife own free and clear.
If half of what Derrick has told us were true, neither he nor his WIFE would be working; and, he wouldn’t be looking to “upgrade” his housing – he would have done that initially with the millions in his pocket [remember, he/his wife have only been able to save about $95K].
And when you counter Derrick, telling us how I don’t have a clue about you, why don’t you tell us what you do for a job? I think it would put your blog comments in better perspective.
Diane Cohn
Wow, there’s a lot of armchair speculating flitting about… Tell me, how many of you have actually been inside 1900 Russell Pointe?
You can only know so much from the virtual tours and pictures online. At some point you have to actually go inside, where the real value of property is most often revealed.
1900 Russell Pointe enjoys spectacular south eastern mountain view overlooking the 18th hole of the Tom Kite Championship Course, including a very large pond and waterfall. It is set high above the course for maximum privacy and minimum golf balls.
I don’t believe this home was built to flip. As I understand it, the owners purchased and upgraded it to use as a second home, but a health issue forced an unplanned sale.
I have personally shown this home to probably over a dozen clients, and though always overpriced, it has over $200K in tasteful upgrades to the point where it shows like a custom home… travertine floors, expensive tile accents, upgraded cabinets, viking range, subzero fridge and all the best accoutrements. This home was outfitted as lavishly as any builder model I’ve ever seen.
I don’t what you guys do all day long, but I sell real estate. If I had to throw personal opinion into it, I always thought that $750K would have been a good deal and that $700K would have been a great deal… but $775K is definitely fair given this home’s unique features and current market conditions. If the new owners intend to hold for a lengthy period of time, they’ll probably do real well.
Tom is right. Value is established by the price a willing buyer and seller agree and close upon. Nothing more, nothing less. Everything else is just opinion.
Diane Cohn
Tex, welcome to the blog, and thanks for your post. Obviously, you know what you’re doing. Given your experience, my suggestion would be to try things on your own for a while without buyer representation and see what happens.
If you approach FSBOs or listing agents, they may be motivated to work with you because you represent yourself. FSBOs will be saving commission costs, but most tend to be very unrealistic regarding price. For the listing agent, an unrepresented you means a double commission paid by the seller which doubly motivates that agent to put the deal together for both parties. This can work well depending on the personalities involved. I’d say try it.
But if none of this yields the deal you’re looking for, start testing buyer agents. We all get paid by the seller anyway, so there’s no cost to you. Call some people, make some appointments to see things, spend half a day in the car with them and see how you feel. Do they know the market? The neighborhood? The trends? A buyer agent is motivated to get you whatever you want wherever you want because their allegiance is to you and you only. And FYI, qualified buyers are king in this marketplace, so you’ll find plenty of people eager to work with you.
If you don’t like any of them, call me or Guy. We are all about the deal and getting the best price possible in an unstable market. One thing about watching the market as closely as we do, we are clear on reality and think strategically about what’s best for you given current conditions and your own personal circumstances.
And who knows? Maybe renting for a year may be the best thing. We won’t know until we connect and learn all the details.
Good luck!
SkrapGuy
Hey Diane, since you tell us you think $700K would have been a “great deal” for 1900 Russell Pointe, may we have your idea of what would be a “great deal” for the house across the street at 1905?
Recall that 1905, although essentially the same size as 1900, sold a month later for $330K less. Currently asking $799K, and purchased for $736K in 10/05, the owners are apparently of the belief that the value of the neighborhood has appreciated since they bought. This, in spite of the fact that the house across the street just took a 27% digger in price. If this spectacular house just took a 27% haircut, should not a less impressive house across the street take a similar drubbing? Has the whole street gone down by 27% in two years, or just this spectacularly appointed house?
What are your thoughts for those of us who don’t sell real estate for a living?
Thanks.
BanteringBear
While your feathers are already a little ruffled, Diane, might I dishevel them a bit more?
You posted:
“…call me or Guy. We are all about the deal and getting the best price possible in an unstable market.”
With all due respect Diane (and I mean that sincerely), how can a buyer trust that you are working in their best interests given that some of your own stale listings appear to be hopelessly overpriced? Quite seriously, some might consider the $800k asking price on the red barn avaricious to the point of insulting.
You’re a smart woman Diane, and I admire you for it, but let’s be realistic for a moment. Anyone doing their due diligence when looking for a buyers agent would surely want to consider the quality of that agents listings, no? I believe the horrendously (over)priced listings damage the credibility of realtors as they are not even remotely indicative of the current marketplace, and elicit the same reaction as would a $50,000 used Ford Pinto. You’ll do yourself a favor by distancing yourself from the fantasy sellers.
Reno Wannabee
Love all the information about sales, prices & other comments.
We, too, have been watching the market and thinking about buying in Reno, but the current listings just don’t reflect much change from a year or so ago when we last visited & looked at houses.
We’ve looked at Somersett, Double Diamond, Caughlin, etc. but think they are all still overpriced. Houses we toured were not very well built, sameness of design & layout, patios looking at a rock wall, so-so quality appliances, hardware, etc. Why isn’t there more individuality, more desigtn choices, better floor plans? We like the idea of Somersett but it’s like being part of a ticky-tacky development. Good design doesn’t cost much more. Good finishing saves money later on with less call backs & repairs.
We are not looking for a mansion by any means, but we also are not willing to pay 4-500,000 for piece of drek & that’s what is being offered.
stjoe
I want to second Diane’s comment about views. When I “built” my current house in 1998, the builder gave me the choice of four lots to build my house. (I was one of the first in the development.) I picked the one with a unblockable view of downtown Reno, the valley, and the mountains on the other side of the valley. Heck on a clear day, I can see the mountain range behind the mountain range.
Whenever some one new comes into the house. One of the first things commented upon is the view. While my house may be identical to the one across the street, I have a great view, they look into their neighbor’s back yard.
SJ
Diane Cohn
Skrap Guy, without even looking or caring what they paid for 1905 Russell Ct, that home is entirely different with its lack of privacy and tiny backyard exposed to the rock wall and next door neighbor. I would say the top dollar price is $600K, and a fair price would be $550K and a good deal would be $500K. Just my opinion, living in the neighborhood, and BTW, I haven’t seen the upgrades or lack thereof inside, which may change my assessment once I do.
Bear, please… It takes a lot more than this to ruffle my feathers. That said, you bring up an interesting point. Perhaps my flaw is that I am a creative marketer and and a sucker for an unusual property because I know how to market it all over the web in unusual, non-traditional ways, and I can see the vision of a unique property. Trust me, the high-end buyer can be eclectic, and they sometimes make surprising decisions.
But in the end, as you suggest, price is the bottom line, and convincing high-end sellers that they need to get real and lower their price is perhaps not my greatest talent. But, carry enough of these non-profitable properties, throwing money at them every month, and that begins to change. It’s a learning experience, and your conclusions are interesting, so thanks for sharing.
Buyers are different, and they are 60-70% of my business. I just closed a deal where we got the seller to come down $160K off a new listing in a prestigious neighborhood… a good price for both buyer and seller in an unstable market. A persuasive, two-page cover letter and several pages of attached market data did the trick.
Every situation is unique, but my thrill in life is the strategic analysis of both sides to the point where you can bring them together where my side wins big and the other side wins okay. It’s like a good game of chess.
Reno Ignoramus
Well Wholly Molly Diane, how interesting that you see 1905 Russell Pointe pretty much exactly the way I do. Yesterday I said maybe $550K. Today you agree, and suggest maybe even $500K.
$500K for 1905 Russell Pointe Cr. in Somersett would be 32% off the 10/05 sale.
Hmmm….32% decline in Somersett in two years.
And the likely future?
2.2 YEARS of inventory.
4% of listings with an offer.
“You can’t ever lose money on a house in Reno.”
NAS
This recent thread has caught my attention. Somersett is one of the areas I have been tracking (long distance) for just under a year. Again, I like the area, etc. but the attraction has begun to fade (much to my disappointment). I’m not a Realtor and don’t live in Reno so my information is only what I’ve grasped via my own resources. And, while this blog is an excellent tool, it has been an adjunct to my information.
Russell Pointe: Beautiful home with nice upgrades. Great southern exposure view, etc. Price sold (agreed) way too high. Same models are on the market over on Castlehawk for 100K less, with views, and probably could be had for a lot less. One of the homes (golf course) sold not too long ago for 643K (with more square footage). I can do the math difference of Russell Point sold @ 775K and the larger house sold @ 643K. There are also rentals of the same model(s) with asking rent prices in the low 2,000/month.
When looking at a property I can appreciate all the “upgrades galore” being advertised, but sorry, those are sunk costs.
I don’t think the area is going to turn into the ghost town of Bodie, but I’d love to fast forward into about 18 months from now.
BanteringBear
Diane posted:
“1900 Russell Pointe enjoys spectacular south eastern mountain view overlooking the 18th hole of the Tom Kite Championship Course, including a very large pond and waterfall.it has over $200K in tasteful upgrades to the point where it shows like a “custom home…travertine floors, expensive tile accents, upgraded cabinets, viking range, subzero fridge and all the best accoutrements. This home was outfitted as lavishly as any builder model I’ve ever seen.”
NAS posted:
“When looking at a property I can appreciate all the “upgrades galore” being advertised, but sorry, those are sunk costs.”
Something that is seldom talked about, but warrants significant attention, is the over improvement of properties. There are seemingly countless examples of this in virtually every neighborhood of every bubble city in the country.
As NAS points out, these are sunk costs. A homeowner can only hope to get back a portion of the funds spent on improvements upon sale of the property. 80% would be generous. Too many fools bought into the flip this house mentality, and spent too much money on rehabbing, upgrades, etc. A property for sale on Moana Lane comes to mind.
I would suggest that the $200k in upgrades on the Russell Pointe home, if that is indeed what was spent (that sounds inflated to me), stand as a great example of over improving a house. Many speculators are learning this lesson right now.
smarten
Diane, the question I originally posited to RI was NOT what he felt was fmv for Russell Pointe but rather, whether he felt $775K was too much given his market outlook for THE NEXT 8 MONTHS – YEAR [and if so, what did he think was “good deal”]?
In a strict legal context, $775K may be yesterday’s fmv. But that doesn’t mean that in a rapidly declining market $775K is TODAY’s fmv. Nor does it mean that it will be viewed as a “good deal” some 8-12 months down the road.
I would submit that when you and Guy are looking at property-after-property, day-after-day, you can become blinded to the light [or in legal parlance, you can’t see the forest from the trees]. That’s why:
1. Sometimes you need to take a step back and view the scene from a different perspective; and,
2. Oftentimes what you see today in the real world is what others first saw 6 or months ago on paper[remember, you initially disagreed with RI’s views of the market only to eventually come around to his point of view].
I know of a lot of appraisers who can give you a fairly accurate opinion of fmv WITHOUT ever having to step foot inside a home. And I know of many who can do the same in a rapidly declining market by discounting recent CMAs [even though Tax Court may not discount]. In fact, you’d be derelict in your duties if you were an appraiser and did not discount current sales in a rapidly declining market!
So was the fmv of Russell Pointe $775K simply because that was its sales price? Maybe.
Will it be viewed as a “good deal” at that price some 8-12 months down the road? Likely not.
Is RI unqualified to share his opinion given he may not have seen Russell Pointe’s insides? No.
Is RI qualified to share his opinion given his knowledge of the Reno/Sparks market as a whole? Of course!
BTW, I can’t believe you were able to get a seller to come down $160K off a new listing in a prestigious neighborhood simply by presenting a persuasive letter. My experience has been that most sellers are living in a fantasy world and tax offence to anyone on the other side who attempts to educate them. So good for you!
RGJ
I find it kinda’ funny that any stupid guest blogger and dumb ole Diane and Guy who are ‘blinded by the light’ earn a living in real estate but you and your fellow constant posters probably invest more time in researching Reno properties than ANY realtor. You must invest 5 or 6 hours a day ‘contributing’ to this blog earning you nothing….. yea – someone’s blinded by the light but it’s not Diane or Guy!
Diane Cohn
Smarten, you’ve hit on exactly why this blog is so valuable for me… opposing opinion opens my world and forces me to challenge my own beliefs.
Yes, I’m a Realtor, and I have a certain expertise, and I believe that I have a lot to offer. But I also know that I don’t know all the answers, and that’s what I love about this blog… it forces me to think.
Those of you in your armchairs watching the market in your own ways from your own perspectives bring incredible value and insight to the situation. That’s why I don’t mind a little ribbing now and then on the barn, or my math or whatever other dumb thing I may occasionally throw out there.
My whole point is to understand the truth of the marketplace so that I can help my clients make the right decisions for them. This blog, and all your opposing opinions only help me to find that truth. And to everyone who takes the time to participate, I am truly grateful.
As for the $160K write-down, the numbers were real, the case was convincing, and once the sellers saw the situation, we were fortunate that they chose to be realistic.
RGJ, thanks for the support!
DERRICK
I’m sorry but I couldn’t help but post a listing that I see as a TREMENDOUS value. suggestions are welcome..
MLS#70012114
A search revealed the house was sold for 752k in 2005.
at 495k that would put it 33% below 2005 pricing.. And we haven’t even made an offer yet.. I’m convinced that if someone were to buy this house for 475k it would be a GREAT deal..
tabbycattx
“We’ve looked at Somersett, Double Diamond, Caughlin, etc. but think they are all still overpriced. Houses we toured were not very well built, sameness of design & layout, patios looking at a rock wall, so-so quality appliances, hardware, etc. Why isn’t there more individuality, more desigtn choices, better floor plans? We like the idea of Somersett but it’s like being part of a ticky-tacky development. Good design doesn’t cost much more.” by Reno Wannabe
Could any one of you here address this issue? I have to agree. I’m really shocked at the lack of diversity in Reno Real Estate. When I found out I might be moving to Reno, a city that appears to have a high percentage of it’s housing that’s less than 10 years old, I was excited to maybe see some “newer” architecture. Instead it looks like Stucco City with the same uninteresting house over and over except for the high spec housing. What happened? Is there no modern architecture in Reno except for a small condo project near downtown? I just can’t believe it’s so bland because Reno seems to have such quirky, interesting people–Of course, everyone on this board is normal…lol.
Reno Ignoramus
Interesting post, RGJ. I suspect that at least some of us “stupid guest bloggers” here earn 3 or 4, or more, times more than most realtors these days. Of course, with 3,000 or so realtors dividing up 250 deals a month, that’s not saying much.
I suggest the notion that knowledge of the real estate market can be fruitful only if one “earns” money in the market is misplaced.
You know how to take $750K out of the market today in Reno RGJ? By having invested $1,000,000 two years ago.
Sometimes, armed with knowledge and insight, one understands that the best move to make in a market is to stay out of it.
Gina
Developer tract homes are always cookie-cutter to a great extent. Most of the established neighborhoods here in Los Angeles county were once “cookie-cutter” tract homes of the 50s and 60s. The unusual and unique homes are custom-built homes, and even those are mainstream for the times.
Developers have to build designs that are contemporary – whether that’s “Tuscan” or mid-century modern. Middle America is all about Tuscan right now. Or that Americanized version of “Tuscan” – if you know what I mean.
To give you a different perspective – if you take a look at the big developer tract homes in Southern California, compared to what’s been built in Reno, you’ll find the Reno homes to be bigger, better designed and better quality.
Why? I truly wish I knew. I think possibly that Californians were snatching up these homes so fast and furious that the builders decided they didn’t have to build them very well here. Maybe there In Reno at the height of the market, the competition was fiercer among builders so they had to offer a higher level of design.
I visited a mind-numbing number of model homes on trips to Reno this year and was very pleased overall at the size, designs and amenities being offered. Courtyards, Guest casitas, 3 and 4-car garages, open floorplans, walk-in showers and huge closets, high ceilings, fabulous kitchens, etc., etc. It made me swoon with “I-want-itis” LOL. Believe me, they ain’t building them so nice here. At all.
DERRICK
No comment on the listing I posted RR? bb?? Im shocked!!1
Reno Ignoramus
Geez Derrick, I remember, not so long ago, when you would unload on me and others, calling us “doom and gloomers” whenever we would suggest that this market meltdown has a long, long way to go. Now, you are providing us with examples of houses selling for 35% off of 2005 prices.
Have you seen the Light?
Yes, perhaps this listing, representing at least a $257,000 haircut may well qualify as a “great deal” under Michelle’s elusive standard.
On the other hand, I believe that Smarten may suggest that it is a “great deal” as of today, but may not be in 8 months or so. That this price is just the most recent price point in the descent downward.
It sure is funny, as Lindie would say, how we seem to be observing more and more listings going for almost 30% off of 2005 pricing, but the good folks at the NNMLS suggest to us that the median is only down about 12% or so.
DERRICK
Im not sure if you could expect to pay any less for the home I listed. The construction costs, along with “160k” in upgrades would more than prevent you from being able to build this house for much less if less at all than the asking price.