Saturday, July 26, 2008

Flippin' Ain't Easy: UPDATE

Reader James pointed out a property featured on the Long Beach Housing Blog has recently undergone a massive price reduction.

To bring you up to speed, please check out my post from April:

I mean, are those pictures amazing or what? It's like they couldn't get out of there fast enough!

Reality appears to be sinking in for this failed flip, because the asking price has been slashed once again--bringing the total price reduction since listing in February to $162,000.

Don't get too excited.

The original asking price was an astounding $562,599. That's like congratulating someone for losing weight, when all they did was take off their shoes.

Sadly, this recent $100,000 haircut is still not enough to move this half-completed wonder. As James said, "150-200K more and it would be worth considering."

The funny thing about James' timing is that I too noticed the recent price cut and was just talking to friends about this house yesterday. I am way more interested in owning a home than an apartment--ERRR, condo, and considering that a lot of the work is already done, this would make a nice little starter home.

However, I've been by the property a few times and there are some serious drawbacks that will substantially impede a sale at this price, or even at $300,000.

1. It's right on Temple. Although not a major thoroughfare like Redondo, it still generates significant traffic. Luckily the flipper installed what looks to be double-paned windows, but I wish you luck trying to back out of the (hideous) driveway. The only stop sign in the area slows down traffic going toward the beach, and you unfortunately would be forced to back out into northbound traffic coming at full clip from 4th Street.

2. It has no backyard. That's right. NO. BACK. YARD. Check out the overhead map and YIKES! Do you have to put your barbecue on the roof? Or how about you and all your friends kick it on the front lawn, five feet from a busy street? Major drawback for people like me who prioritize entertaining guests. And plus, what's the point of buying a house rather than a condo if it has NO FRIGGIN' YARD?!

3. It still needs work. For someone like me, that's not an issue because I'm obsessed with home improvement projects. However, for most buyers plunking down $300-$400k, knowing the house still needs exterior/interior painting, detailing (exposed electrical sockets), work on the midget garage, and God knows what else, isn't too appealing.

4. It's old, old, old. And judging by the half-assed work and even halfer-assed pictures, I can virtually guarantee corners were cut during the flip process. Then you have to worry about archaic electrical and decrepit plumbing. This is a big risk with these old houses as compared to buying a newer condo. Lowball accordingly.

When you put that all together, it's obvious the asking price is evidence of serious brain damage. As a reader recently articulated, "There ain't no cure for dumb."

Actually there IS a cure for dumb, and it's called Market Forces. And the less we screw around with bailouts and attempt to drag out this inevitable housing crash, the sooner idiots with eyes bigger than their checkbooks will be purged from the market and hardworking, responsible, first-time buyers with strong senses of financial responsibility can buy these houses for affordable prices.

The listing claims this house is a "Great home for 1st time buyers." At this price, a qualified first time buyer would have to be pulling down at least $100,000 per year and come to the table with $80,000. Even with those parameters met, this miracle buyer would STILL be cash-strapped and unable to save, live a decent lifestyle, or contribute to our ailing economy in any meaningful way.

If this property sold today for asking price, the loss would be a staggering $140,000. But everybody (except for this dummy) knows this thing won't sell for anywhere near that amount. At $300,000, I'd mosey on down for a look-see. But until we're in that pricing neighborhood, there's no way I'm moving to this neighborhood.

Claiming this is great for first time buyers is like saying amputating your leg is a great way to shed some pounds.

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