A Tale of Two Cities: UPDATE III

This is the third post featuring my favorite 7th Street booger barn.

Today's post is significant because, well, I'm becoming quite an accomplished fortune-teller. As a quick recap, this snot cottage started life on the MLS in February 2008 with a laughable asking price of $310,000.

Six weeks later the price was slashed to $265,000. At the time I said:

At $160,000 it might make sense as an investment property. It would have to be torn down (or maybe the Historical Society would come down on you for trying to level this 95 year-old dumpster) and rebuilt, so you have to factor in those costs as well.

In mid-April, right on cue, the price was reduced another $40,000 (to $225,000). To their credit, they are one of the few Long Beach residents that saw the writing on the wall and priced aggressively. But it wasn't good enough.

You see, just today I received notice that the price was reduced to $215,000. What do you want to wager that the $95,000 discount from the original asking price STILL won't be enough to move this little mold holder?

P.S. Check the comments section from Wednesday's post for an interesting tidbit from FreedomCM. HUD is just warming up in the bull pen for some serious auction action, which will all but guarantee my predicition that this seller's price cuts (aka Chasing the Market Down) won't cut the mustard until the asking price is flirting with $160,000. Do you doubt the predictive powers of The Great El Bee? DO SO AT YOUR PERIL!

Happy (Almost) One Year Anniversary!

Address: 5585 E PCH #146, 90804
Asking Price: $259,900
Year Built: 1970
Size: 1 bed, 1 baths, 597 sq. ft.
$/Sq. Ft.: $435
HOA Fine: $193
Purchase price: $276,000
Purchase date: 2/2006
MLS#: H07082024
On Redfin: 359 days
Down Payment: $25,990
Monthly Payment: $2,000
Income Requirement: $65,000
Description: Fantanstic price and motivated seller. Great location towards the back of the complex. Sauna and Pool services are right there. Peaceful and pleasant complex and minutes from Cal State Long Beach, restaruants, beach, and shopping. Please see this property today.

First of all, congratulations on making it to a full year on the market! We knew you could do it!

I especially love the "Please see this property today" appeal at the end. Now that the Great Housing Scam is over and this property has gathered MLS Mildew for nearly 365 days, can’t you just hear the desperation in the realtor’s voice: “Plllleeeease see this property today! PLEASE!”

By the way, Realtard, if this is such a “Fantanstic” price then why is it still rotting after a year on the market?

Further, if the seller is so motivated then why is the current asking price a paltry $2,100 less than the original demand from way back in the day? Seems a motivated seller would price aggressively and get the hell out of dodge instead of dicking around like this.

The answers to both of those questions is: Because this asshole overpaid for a crappy condo and will be financially obliterated if he reduces the price one more dollar.

You see, our home“owner” here bought at the peak of the market for $276,000 with absolutely no regard for market fundamentals or how out of line that price was with local rents.

His monthly payment, including HOA fine, taxes, insurance, etc. is $2,100, but a unit in the SAME EXACT BUILDING is renting for $1,150.

http://losangeles.craigslist.org/lgb/apa/695111983.html

1 bedroom 1 bath condo located at PCH & 7th St., 1 block from VA Medical Center and 3 blocks from CSULB. Amenities include pool, jacuzzi, gym, game-room, cable TV, tennis court, A/C, heat, stove/oven, dishwasher, refrigerator, new carpet and paint, quiet unit with balcony, security building & parking. Rent is $1,150 per month plus security deposit. Credit check required. No pets allowed.

Whoops, it’s costing this fool almost TWICE to "own" what it would cost to rent an identically shitty unit.

Doesn’t this guy have a calculator? How about a frigging newspaper? There’s this thing called “The Classified Section” that lists properties for rent. Perhaps you've heard of it? One peek would have told you this transaction was financial suicide.

And these are the idiots the government wants to bail out? If morons like this get bailed out with my tax dollars, I’m demanding a government bailout to compensate me for that vintage truck I bought in 2006. The seller assured me it would go up in value and that if the project was too much for me, I could just turn around and sell it for a profit.** I lost money on it and now I’m demanding a bailout!! Please explain to me how that is ANY different.

Anyone? Bueller? Bueller?

I wouldn’t pay a penny more than $100,000 for this dump. How do I know it’s a dump? They’ve had at least 359 opportunities to update the listing, and there are three shots of the pool and no interior photos. Not a good sign.



100 Large is a generous appreciation from the 2001 (this decade, folks) price and that’s what it would take to pencil out as an investment property. That took me 3.7 seconds to calculate. Why was that so difficult for this guy to do? Wasn’t a trusted, knowledgeable, experienced realtor showering him with their expertise?

Oh, and to anyone contemplating making an offer on this place, be sure to check your comps (you never know if your realtor will actually do their job). You might be surprised at what you find:

One neighbor is undercutting the loser in #146 by 10% with no action for six months (purchased for $280,000):

http://www.redfin.com/CA/Long-Beach/5585-E-Pacific-Coast-Hwy-90804/unit-253/home/7590247

And here’s one that’s 687 square feet selling for $199,000 with no takers (reduced from $268,000, by the way)

http://www.redfin.com/CA/Long-Beach/5585-E-Pacific-Coast-Hwy-90804/unit-223/home/7590223

And on and on in this building. If you look on Redfin, this complex is like a drowning dog and the fleas are frantically (and futilely) trying to make an escape.

These financial failures should not be bailed out by the government for their poor investments, and I’m beginning to wonder if they’re intelligent enough to be allowed to continue sharing the same gene pool. Of which they have so generously included three photos.

**True story

The New Floor in Pricing: UPDATE

Yeah, I thought as much.

Remember the $199,000 condo in the Lafayette that seemed too good to be true?




It was a total scam.

I assumed it was a ruse to start a frenzied bidding war (I mean, it was a good enough deal to get ME, the resident housing bear, out from hibernation and ready to tour it!) and I was right. Now that the place presumably garnered a great deal of interest, the price has magically been changed to Greed-Head status.

Pretty clever...if it weren't so pathetically transparent. We now have an asking price of $319,000--a full 60% more than yesterday's asking price!

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Remember, the original listing description went like so:

GIGANTIC PRICE DROP!! Nearly $300,000k off original list price!! No question this is the best price per sq. foot in downtown Long Beach. This is NOT a SHORT or REO - although it's priced like one! This amazing one-of-a-kind unit in the historic Lafayette Building is loaded with history and a classic vintage feel. The property includes a rooftop garden w/ fountain and city views, inside laundry hook-ups, and NO COMMON WALLS. New kitchen & Brazillian Cherry Floor in 2nd bedroom. A state-of-the-are gym is included in low HOA. The rooftop solarium has spectacular views of the entire L.A. basin and the Long Beach harbor / Catalina. BEST VALUE in the historic East Village landmark once owned by the Hiltons! Walk to everything! Pet friendly. Parking is available. Get the VALUE of a short sale without the hassle. This owner is motivated beyond belief! Get your offer in now before the deadline - call for details. Showings are appt. only. Investors this is your chance for a spectacular deal.

But now they pulled a bait-and-switch and the new greed-tastic description differs considerably:

BEST AND FINAL (BAFU) [Yep, they just tried to F U] offers now being accepted! Bid / offer date extended to close of business Tuesday June 2 [Whatever that's supposed to mean. Notice there is no mention of the big price reduction, which is what got people interested in the first place]. Priced way under market - February appraisal was $450k!!! [Well then why in the name of Buddha would they not price it closer to that number? Furthermore, this wasn't mentioned in the first listing--they're trying to justify the pricing head-fake]This is NOT a SHORT or REO - run your comps, and make reasonable offer. [Now this just sounds bitter. Have you noticed how the tone has changed? Earlier they were almost HAPPY to unload this thing for such a great price, now they seem indignant that anyone actually submitted offers for the price that THEY reduced it to--which they now consider "unreasonable"] This amazing one-of-a-kind unit in the historic Lafayette Building is loaded with history [No mention of the "classic vintage feel"?]. The property includes a rooftop garden, inside laundry hook-ups, and NO COMMON WALLS. New kitchen & Brazillian Cherry Floor in 2nd bedroom. A state-of-the-are [still didn't bother to fix this typo] gym is included in low HOA. The rooftop solarium has spectacular views of the entire L.A. basin & the Long Beach harbor / Catalina. BEST VALUE [Not as good of a value as it was 24 hours ago] in the historic East Village landmark once owned by the Hiltons! Walk to everything! Pet friendly. Parking is available, 3 options! [Wow! 3 options! Street parking, paying through the nose at the Hyatt, or riding a bike]. Unless one of those options is two parking spots underneath the actual building, they can kick rocks for $319,000] Get the VALUE of a short sale without the hassle. [Notice how they removed the "seller is motivated beyond belief" bullshit. Yeah, now that dollar signs have appeared in his eyes, the seller is mysteriously not so motivated anymore] Showings are appt. only. Investors this is your chance for a spectacular deal [Can you believe these idiots kept this part in the listing? I mean, with parking and HOA fees, it BARELY penciled out as a rental property at $199K. Now, an incredible $120,000 later, they are still claiming it's spectacular for investors. Unbelievable]. Multiple offers are expected: call agent for details [Well, they WERE expected at the old price, but not anymore. It's back to avarice-fueled pricing and another 200 days on market].

The nerve.

And look, they even brought in stagers this time!

You know what's sad? They are going to end up selling it for around $199,000 anyway. That is the price an investor will come in at. Think about it: How much rent could an owner charge knowing that the parking situation is an absolute mess? I can't imagine too many people are willing to pay $2,000 a month to deal with that horsecrap. That needs to be factored into the price from an investment standpoint.

It's just that now, thanks to their JUST KIDDING! shenanigans, they're not going to get their $199k until years from now. And after carrying costs, maintenance costs, parking and HOA fees have eaten them alive during that time, they will realize that they should have just priced the thing to sell from the beginning and not played games in the name of greed.

Welcome to the Party, Pal!

Address: 4723 E 3rd. St 90814
Asking Price: $790,000
Year Built: 1950
Size: 2 beds, 2 baths, 1044 sq. ft.
$/Sq. Ft.: $757
Purchase price: $525,000
Purchase date: 2/2004
MLS#: I101516
On Redfin: 20 days
Description: None
Down Payment: $79,000
Monthly Payment: $5,000
Income Requirement: $197,500

No description after three weeks on the market? Really?

Here, I will help the helpless and provide a killer description:

WELL MAINTANED, VINTAGE estate perfect for 1ST time buyers!!!!!! No trendie granitt or stainless stell aplliances—just tile in the LITE N’ BRITE kitchen!!!!!! Rare brazilien bamboo flrs!!!1 ONE BATHROM UPGRATED: but other is “ALL ORIGINAL”! !!1! Start living the Belmont Hites life!!;!

Wow, a hair shy of $800K. That's Orange County money.

Last time I checked 3rd Street is not on the water, so how could this seller possibly justify asking $757 per square foot? Further, how could the realtor allow their client to embarrass themselves with this DUH-lusional wishing price?

Hell, even Zillow.com, which is known for spouting hideously optimistic property values, will give it “only” $572 per square foot.

This just in: YOUR COOKIE TIN IS RIDICULOUSLY OVERPRICED.

Unless he’s planning on cutting 20% off the price (and not this piddly 7% crap they pulled yesterday) there is no way he can compete with other sellers. Nearby houses that are nicer and asking way less money have remained unsold for much longer. Bad News Bears.

Plus, I don’t see any major upgrades (ugh, that kitchen). Sure, they remodeled one bathroom but check out the tiny shower door! Do you just stick one limb in at a time?

The original bathroom (below) is actually kind of cool, but those slat windows--OY! The line between “retro” and “older than dirt” is a subtle one, but ordering only 28 vinyl windows for a 29-window house is a good way to end up in the dirt category.

Speaking of dirt, why no pictures of the backyard? Afterall, that's one of the biggest advantages of owning a detached home instead of a condo. Well, that and avoiding an HOA fine. If the backyard was nice, don't you think they'd include it in the listing photos? Actually, these are the same marketing geniuses that provided no information in the listing description, so who knows. Either way, I'm betting the back yard is a dirt farm.

Wait a minute! I just looked at the overhead map and THERE IS NO BACK YARD!! Dude, this place is a mess.

FYI, this place sold for $367,000 in 2002. That seems a little high even for back then (I wouldn’t be surprised if the upgrades were performed before ‘02. It explains the outdated look of the kitchen and bathroom), but it is right in the heart of a prime neighborhood so a premium is expected.

However, given that a bulk of the properties actually selling these days are at 2003 prices, this has a long way to go before it approaches basic investing principles.

With that said, I think a knife catcher would come in at $525,000 because of the allure of buying at the "2004 price." He'll be underwater immediately, but that's the price I think will attract a buyer.

But remember, before that blade-clapping buyer so fond of terrible ROI (Return On Investment) swoops in, the delusional seller will have to cut an astounding 30% to even entice a sale.

Considering how “special” this house is (isn’t everybody’s?) to earn 50% appreciation during the last four years when most houses selling recently are LOSING money, I doubt the seller and their realtor are level-headed or serious enough to do what it takes to sell.

Greed will rule the day, and this house will sit until that kitchen comes back in style.

Shorn in The Shore: UPDATE

In my crystal ball I see...yes...desperation...distress...and...it's getting foggy...ah, yes...I see a short sale in the future.

Hopefully you'll recall this hideously-decorated Belmont Shore condo with the Smurf-tastic kitchen:

Well, this seller just lopped a cool 15k off the asking price. But, I guess that's a mere drop in the bucket when your asking price is $415,000. Kind of like putting a carbon fiber gas cap on a lifted Hummer.

This latest reduction provides a grand total of $90,000 in price reductions since it went on the market. It's still not moving. This means he'll have to do a lot better than 4%.

This price slash smells like the reluctant, well-okay-I'll-do-it-because-my-realtor-said-it-would-start-a-bidding-war-but-I'm-not-going-any-lower-because-my-condo-is-special variety, and the tarot cards predict very bad things for this seller.



But there's a reason the discounts have slowed to a trickle after a very aggressive cut in March: He's severely underwater and every price cut puts him further into financial hell and closer to foreclosure.

Remember, he purchased in 2005 for $440,000, meaning if this overpriced, overdecorated, overrated snuff box sold for current asking price, the total loss would be nearly $65,000.

Damn. That's just ugly.

Speaking of ugly...

I don't know about you, but I don't have $65,000 just layin' around to cover financial catastrophes. Plus, when it sells for $350,000, the loss will be more than $100,000. Which means this thing will end up being a short sale or will go back to the bank.

And remember, installing SnapOn toolboxes in place of kitchen cabinets ain't free. There have been considerable upgrades to this condo (floors, bathroom, kitchen *horf!*), I would guess around 40 to 50k, and that too will disappear like panties at a Tom Jones concert.

Why not just keep the place, rent it out and ride out the storm for the next 5 to 10 years? Oh, that's right, because the payment is almost $3,000 a month and local rents aren't anywhere close to making this anything but a cash-negative nightmare. Obviously they can't afford the place, otherwise why would they be selling in the midst of one of the worst housing/credit crises in U.S. history?

I wish they'd just stop delaying the inevitable and default on the thing.

Soon enough, friends.

Orange You Glad You Bought in '03?

Wow.

HOUSE WITH 3 BED 2 BATH, THE HOUSE HAS BEEN DIVIDED INTO TWO SEPARATE LIVING SPACES, 2/1 BATH AND 1/1 BATH (GOOD FOR HELP YOURSELF IN THE MORTGAGE PAYMENT) LONG DRIVEWAY WITH CARPORT. CLOOSE ELEMENTARY SCHOOL. YOU MUST TO SEE TO APRECIATED.

I think it's a little too "CLOOSE" to that elementary school because agents are apparently outsourcing their work to third-graders.

AND THANK YOU FOR YELLING. YOU HAVE MY ATTENTION. I AM READY TO BUY NOW.

First, do we even need to debate whether their little "TWO SEPARATE LIVING SPACES" construction project was permitted? There's about as much chance of that as gas prices dropping to 50 cents a gallon.

Second, you know a house is severely overpriced when the realtor herself concedes renting out the Bob-Vila-on-a-two-week-meth-bender 1 Bed/1 Bath "apartment" is your only conceivable shot at swinging the mortgage payment. But the realtor told me it's GOOD FOR HELP MYSELF so perhaps I shouldn't be too quick to judge.

There are so many things wrong with this listing (and the property itself) that frankly, I don't know where to begin. I mean, out of the 13 photos provided, three are repeats. And out of the 10 pictures remaining, we get this:


"Do you mind, ladies? We're trying to sell a house here."

I love how there are very few interior shots, but numerous photos of the innumerable parking configurations this gem has to offer:

But, when it comes to staging and photographing the inside of this house, no expense was spared:


Can't you just feel the cockroaches scrambling across your toes as you eat your Frosted Mini-Wheats on that busted-ass catcher's mitt of a sofa?

But enough poking fun, let's get down to brass tacks.

Address: 1080 Orange Ave., 90813
Asking Price: $359,900 (reduced from $391,500)
Year Built: 1920 (Really? The place doesn't look a day over 75)
Size: 3 beds, 2 baths (technically), 1504 sq. ft.
$/Sq. Ft.: $239
Purchase price: $275,000
Purchase date: 1/2003
MLS#: Y802842
On Redfin: 11 days

Almost $360,000 for this asthma shack. Can you even believe it? What does that work out to?

Down Payment: $35,990
Monthly Payment: $2,700
Income Requirement: $90,000 (local median income is around $25,000. You read that correctly, punchy)

That asking price represents nearly $65,000 in profit after commissions. Hell, they deserve it for having to live like derelicts for five years!

Now, you have to give them credit for buying before the bubble really took off. Must be a shrewd businessman, eh? (Well, except for the whole you-picked-the-worst-time-since-The-Great-Depression-to-sell-your-house thing).

Importantly, regardless of the attractive $239 per square foot price (wow, friends. It's getting ugly out there. A few more quarters of this and they'll be paying us to buy condos on the sand) the indisputable fact is that this home is in a terrible, awful, horrendous neighborhood. This 'hood is so bad it makes Fallujah look like Newport Coast.

Honestly, I'm surprised they didn't call this "Alamitos Beach" like so many other real estate fraudsters. They actually admitted this dump is in North Long Beach. And I know I haven't featured much in North LB (because in my mind, just like Rocky V, it doesn't exist), but trust me when I say that if you value your property and your safety you don't want to live there (unless of course, you're a gang member or drug dealer).

I'm sure someone will be quick to single out Bixby Knolls as an exception to the North Long Beach characterization. Yes, Bixby Knolls is extremely nice with amazing(ly overpriced) properties, but it's proximity to rampant crime and poverty makes it difficult to justify those prices. Frankly, I've never understood the allure of Bixby Knolls. Yes, some houses are beautiful and you can actually have a nice sized yard for your kids, but as far as the surrounding area goes it's like a gorgeous, desirable diamond placed gently upon a pile of camel shit.

Anyhow, this property will be lucky to sell for the 2002 value. As we all know, a vast majority of the properties actually selling in nice areas of Long Beach are at 2004 prices, and it'll be '03 in no time. So what hope does that provide to sellers in awful neighborhoods?

And despite the $30,000 price cut, at this asking price they'll have plenty of time to ponder how best to park all of those cars.

If the seller wants to wake up from this nightmare with a reasonable amount of the equity built up during the last few years, they'd better get serious. Either that or open a valet business on the side.

The New Floor in Pricing

Good luck with this one, pal.

Address: 140 Linden Ave, #957 (how many units are in this place?!) 90802
Asking Price: $615,000
HOA Fine: $420
Year Built: 1928
Size: 2 beds, 2 baths, 1210 sq. ft.
$/Sq. Ft.: $508
Purchase price: $76,000
Purchase date: 5/1999
MLS#: S518068
On Redfin: 112 days
Down Payment: $61,500
Monthly Payment: $4,700
Income Requirement: $154,000
Description: ULTRA MODERN ART DECO LIVING! Rarely on the market, this large 2bed/ 2bath corner unit is located on the 9th floor of The Historic Lafayette Building in the heart of the East Village Arts District. A designer home complete with: Australian Sandstone floors, a raised kitchen completely remodeled with Brazilian Mahogany wood Floors, Granite countertops, a glass backsplash, and a large elevated breakfast bar, dining area, and complimented with stainless steel appliance package . Finishing touches include recessed lighting, inset speakers, a walk in closet and computer area. The bathrooms maintain their original Art Deco tile with some modern finishes. Each Bedroom offers breath taking mountain, city and ocean. The building amenities include an onsite manager located in the beautiful 2 story main lobby, a rooftop solarium with panoramic views, and a state-of-the-art gym and billiards room.

Hey, dummy, ya think after 112 days on the market it might be time for a price reduction?

Notice that in that lengthy description, they didn’t mention the parking situation. That’s because there is no parking in the building. That’s right. Street parking. In downtown Long Beach. Hope you brought your running shoes.

If you want to protect your car and personal safety, it’s going to cost another $67 per month to park two and a half blocks down the street at the Marriott. Want to make sure your mom or your girlfriend don’t have to walk around downtown LB at night to get to your place? That’ll be $134 a month.

DEAL KILLER.

Could you imagine slapping down $4,700 a month** and being forced to drive around all night looking for street parking? Plus, if you’re pulling in the $154,000 per year required to afford this place, I’m sure you don’t drive a shitbox that you want to have sitting outside on the street constantly.

At this price, this condo ain’t going anywhere. Even at half price I don’t think it will see much interest. Keep in mind, that modern furniture and fancy schmancy decorating crap doesn’t come with it.

But, if you can’t quite swing the nearly $5,000 mortgage payment I have good news: The seller simultaneously trying to rent it out!

http://losangeles.craigslist.org/lgb/apa/662688660.html

For rent by Owner. This large 2 bedroom, 2 bathroom corner unit is located on the 9th floor of the historic Lafayette Building in the heart of the east village arts District, a short walk to downtown urban shopping or the new waterfront project, The Pike at Rainbow Harbor.



It goes on an on with all that superfluous crap about Australian Sandstone floors, Brazilian mahogany floors, golden Peruvian soap dishes and chrome Mongolian microwave buttons. What’s most interesting about the rental description is that the lease is revealed as on a “month to month basis.” Why? You think some idiot, after 112 fruitless days rotting on the market at that ridiculous asking price, is going to suddenly come along and swoop it up for asking price? Good luck with that.

But from a rental perspective, apparently keeping all options open is this seller’s focus.

And renter beware.

This financial wizard might try to make you pay for his fiscal blunders and throw you out at the first glimpse of a sale (after happily taking your first and last month’s rent up-front).

And speaking of financial wizardry, let’s look at the asking rent.

Hmmm…$2,450, eh? Forget for a moment how ridiculous that is (remember, unfurnished), it’s barely HALF of the monthly mortgage. Please, oh wise one, explain to me why anyone, in their right and fluid mind, would consider stretching themselves to buy this over-designed luxo-shack when they could rent it for $2,000? (that’s right, I said it—two grand. No way you’re finding a sucker to pay $2,450 plus parking fees)

Clearly, this place is immensely overpriced.

But why? I suppose it’s because the seller dumped a lot of money into renovation and wants to get it back. However, assuming this place appreciated at a (generous) 5% per year after the purchase in 1999 for $76,000 (um, wow), this place would still be worth only $110,000. This condo looks nicely done, but is it $505,000 worth of “nicely done”?

Who knows, maybe those rare “Brazilian Mahogany wood floors” are really expensive.

Hmm, this neighbor also has Brazilian hardwood flooring, let’s find out:

Address: 140 Linden Ave, #711, 90802
Asking Price: $199,000
HOA Fine: $365
Year Built: 1928
Size: 2 beds, 2 baths, 1078 sq. ft.
$/Sq. Ft.: $185
Purchase price: $138,000
Purchase date: 6/2001
MLS#: R712304
On Redfin: 180 days (happy 6 month anniversary!)
Down Payment: $19,900
Monthly Payment: $2,100
Income Requirement: $50,000
Description: GIGANTIC PRICE DROP!! Nearly $300,000k off original list price!! No question this is the best price per sq. foot in downtown Long Beach. This is NOT a SHORT or REO - although it's priced like one! This amazing one-of-a-kind unit in the historic Lafayette Building is loaded with history and a classic vintage feel. The property includes a rooftop garden w/ fountain and city views, inside laundry hook-ups, and NO COMMON WALLS. New kitchen & Brazillian Cherry Floor in 2nd bedroom. A state-of-the-are gym is included in low HOA. The rooftop solarium has spectacular views of the entire L.A. basin and the Long Beach harbor / Catalina. BEST VALUE in the historic East Village landmark once owned by the Hiltons! Walk to everything! Pet friendly. Parking is available. Get the VALUE of a short sale without the hassle. This owner is motivated beyond belief! Get your offer in now before the deadline - call for details. Showings are appt. only. Investors this is your chance for a spectacular deal.


Whoops! Same floors (except with an extra “l”), dramatically different price. Can you say COMP KILLER?

I know, I know, the listing seems fishy. Suppose you’re in the market for a new car. You pick up an AutoTrader and flip to, let’s say, the HUMMER section. After determining that 2003 models with similar miles are going for $36,000 - $40,000, you stumble upon one with custom wheels and really low miles for $20,000.

Your first thought is, “What’s wrong with it?”

Well, that’s exactly what I thought about this listing. Regardless of whether it’s a ploy to start a bidding war, it’s a real listing. That’s right: A 2 bed/2 bath for $185 per square foot.

Anyhow, the most amazing part is that assuming this is not a foreclosure, assuming it’s not a short sale, and assuming the seller really is this serious…it almost pencils out in a rent vs. own calculation. Exciting, right? This is the first sign Long Beach is returning to the Land of the Logical!

But, before you get too titillated about this condo (like I did initially) you musn’t forget the $365 per month you’re plunking down for the HOA fine. Yes, there is a billiards room (there’s also one down the street at Rock Bottom Brewery and it’s MUCH cheaper than $365 a month), but the monthly fee adds another $131,400 during the life of the loan.

So now this place, with no parking, in an 89-year-old building, with old ass windows and disco mirrors on the wall is in fact priced at $330,400. Not such a smoking deal anymore, is it?

Regardless, this condo WILL sell at this price. There’s no doubt in my mind. It really is a good deal and I’m not even bearish enough to think it will go significantly lower than this (unless, like that low mileage Hummer, there is something seriously wrong with it). The fact is that it is near rental parity, meaning this close to the price it should be selling for.

I guess the larger question is, once this seller skips town with their 50 grand in cash (damn, if they had just priced aggressively from the start, they could have pulled in at least double that), what happens to the rest of the Lafayette? The new comp for a 2/2 will be a third of #957’s asking price, and will absolutely obliterate any hopes of the 1/1 units unloading for north of $150,000.

Anyhow, I’d just like to congratulate the seller at #711 for being the first property on this site to accept reality. You’re showing all those other idiotic, Kool-aid drinking sellers what it takes to move a property in this rapidly disintegrating market.

Your neighbors will want to put a phillip’s head screwdriver through your temple, but buyers like me will hold you in the highest esteem.

**Keep in mind my calculations take some serious liberties with assumptions. First, I’m assuming a 6% interest rate, which, on a jumbo loan, would be miraculous to obtain. Second, I’m assuming a lender will only require a 10% down payment in a rapidly declining area of Long Beach on a massive $500,000+ loan. I doubt you could find a lender to accept anything less than 15% in such a transaction.

An Honest Realtor? Get Out of Town.

I would like to welcome the new readers of RE in the LBC--I'm glad you found the site. I appreciate all the activity in the comments section. A reader shares:

"...Same crap is going on in the Lakewood area, where I live now. Absolutely delusional sellers. I know a local RE agent who handles REO stuff almost exclusively who tells me to just hold on. Very cool lady who says the bottom is going to drop out pretty soon. According to her the listing prices are fantasy and currently any offer within -25% is seriously considered. Even then she said most fail to qualify for a loan. Sanity & CASH while reign within the next two or three years. Thanks again for your great site. It's a blast."

First, thanks for the on-the-scene information. Second, the commenter got me pondering the future of real estate agents now that their pivotal role in the Great Housing Ponzi Scheme has been exposed. I mean, just take a gander at some of the lazy, half-assed, sad sack listings featured on this blog. Need I remind you that even the barely-literate, uneducated, spell-check-deficient realtors demand the same 6% commission?

I am all for commissions and professional services fees in business. The whole idea behind commissions and fees is that you seek the EXPERTISE of a professional, and you pay them for that expertise.

For example, an attorney or a stock broker presumably has more education, experience, and, there's that word again, expertise in their field, and to help me navigate a world I'm less familiar with, paying a fee for their counsel and advice is well worth it. Additionally, if a real estate agent representing a seller can effectively market a home, bring buyers to the table, and get top dollar for their client, then they've clearly earned that commission.

A problem with buyer's agents earning a commission is that, as we found out, many realtors actually knew very little about real estate, basic economics, and financing 101. A buyer's agent with any kind of expertise or understanding of basic fundamentals would recognize that their client was getting into a house they couldn't afford, and a realtor with a moral compass would be obligated to forgo their commission on that particular property and advise their client to look elsewhere and prevent financial Armageddon.

How often do you think that happened during the last five years?

Or what about the situation we're in now, where in a rapidly declining market, seller's agents are afraid to tell their clients the truth (or are equally oblivious to the harsh realities at play) and properties rot on the market. How much of a service are you providing to your client? How does ignoring undisputed economic indicators of housing deflation (or acknowledging them but keeping them from your client) help the person seeking your professional opinion?

The problem here is greed. The bigger the purchase price, the bigger the commission. That motivates seller's agents to hold on to delusional prices and drag out the housing crash even longer than necessary, and it motivates buyer's agents to convince their clients to "stretch" into those more expensive homes.

When I hire an attorney or a stock broker, I want them to tell it to me straight. That's what I'm paying for. In a real estate transaction, I don't want to feel like I'm being hustled by a used car salesman, trying to get me into that overpriced lemon so he can get his cut and never have to see me again. But in many cases, that's exactly what occurred.

So that brings me to the commenter's realtor friend in Lakewood. As much as greed-head realtors were complicit in the housing ponzi scheme and it's destructive aftermath, I have to feel sorry for the honest, educated, hard-working agents out there.

It takes a lot of guts, especially since her sales commissions have presumably dropped off a cliff, to tell a potential client to keep waiting. When putting food on the table and making car payments is at risk, there would be great motivation to lie and spout that same old garbage about, "Now is a great time to buy! Don't get priced out forever! Prices have hit a bottom!"

Anytime I hear that, I instantly know that the person has no credibility, no idea what's going on in their own industry, no grasp of fundamental economics, and no f**king chance of representing me in a transaction.

In fact, I was looking at apartments last week and the woman showing me the rental happened to be an agent for a major real estate agency. She didn't give me her card until after we were finished touring the property, but I should have known given the way she was hyping up the amenities of the outdated, dirty, overpriced condo (I should have brought a camera).

Anyhow, we were talking about my income and credit score when she said, "Well, why don't you just buy a place?" I was a little stunned.

Politely, I said, "I'm waiting until rental rates and mortgage payments approach parity again."

She quickly replied, "Now is a great time to buy."

Yikes.

I asked, "What do you think the mortgage would run on the condo we just looked at?"

She quickly saw my point and the conversation was over.

Those seven simple words, "Now is a great time to buy" told me all I needed to know about her. First, I knew I wouldn't rent an apartment from her, let alone have her help me buy a house. Second, I knew immediately that she has no grasp of her own industry, is oblivious to the very factors that make her industry function, and if she did, she consciously repressed that knowledge in order to sell me on buying a condo.

The point is, I clearly had a better handle on the real estate industry and the housing market than this realtor. Given that, why in the world would I pay her a commission? What exactly is she providing to me for that fee? I just don't see how someone like that could expect to have a future in that industry.

I commend the commenter's realtor friend for having an understanding of the market factors at play, and I'll bet when this housing crash is finally over, our commenter will feel that trust has been earned (at direct, personal expense to the agent) and will gladly pay a commission to be represented by an honest, knowledgeable professional.