Wednesday, December 10, 2008

The Two Ls of Real Estate

Address: 35 Linden Ave #204, 90802
Asking Price: $295,000
Year Built: 1987
Size: 2 beds, 2 baths, 1,031 sq. ft.
$/Sq. Ft.: $286
HOA Fee: $285
Purchase price: $240,000
Purchase date: 11/2008
MLS#: S556668
On Redfin: 1 day
Down Payment: $59,000
Monthly Payment: $1,900
Income Requirement: $84,000
Description: LOCATION LOCATION! This 2 bedroom 2 bath condo is close to everything. It is within walking distance to the Marina, the Aquarium, Pine St. and the East Village. The condo has been updated with graite counter tops in kitchen and newer cabinets. Beautiful tile flooring is in kitchen and living room. Large living room with a fireplace. The building is secured and the subterranean parking is secured. Don't miss this great oppuritunity to own a condo in this great area and at a great price.

“Graite” counter tops? Did he misspell “granite” or fail miserably trying to spell “great” phonetically?


Ugh, what a mess.

And by the way, how inept do you have to be as a listing agent that you botch the most oft-repeated cliche from the Realtor’s Guide to Selling Used Junk, “Location, Location, Location”?


Perspective: this two-bedroom apartment sold for a heart valve-rupturing $400,000 at the height of bubble madness in the summer of 2005. Yes, this place.

Just a few weeks ago on November 19, it was purchased (probably at auction) for $240,000. Assuming the current wannabe flipper is the lender, they already kissed off $160,000 taking it back.

If the lender can successfully flip it for their desired $295,000, they will recover about $37,000 after commissions. Hey, better than nothing.

But, as usual, the question becomes Will they find a buyer at their (quite optimistic) asking price?

Let’s explore the qualities of this (desperately-needed) buyer:

*He or she rakes in $84,000 in household income (almost three times the median income of $33,506! Ballers!).

*He or she has to come to the table with $59,000 in cold, hard cash for a down payment.

*He or she has to be really enthusiastic about shelling out $285 per month in HOA fees, despite the absence of a pool or fitness center.

*He or she is super excited about living in an area where they wouldn’t want their significant other to walk down the street alone at night.

*He or she is way pumped about paying $1,900 a month--which is more than equivalent rent--for two shared walls and balcony view of, um, another building.

Seems like a piece of cake, right? I bet those buyers are beating down the realtor's office door!

But I sure hope those mystery buyers don’t read this blog, because they might not be too thrilled to learn this place sold in 2000, pre-bubble, for $150,000. Yep, 150k.

If you apply the 20% annual appreciation this place enjoyed from 2000 to 2005 (I know, ridiculous, but bear with me), the current asking price still represents a late 2003/early 2004 rollback.

BUT, if you factor out that absurd bubble appreciation and apply a more realistic appreciation rate of 4% since 2000, you end up with a current value of $213,000.

And what do you know! That number, which yields a $1,500 payment, is consistent with local rents!

Even giving this seller an early Christmas present and applying a 5% annual appreciation yields $233,000.

These people are way off if they think they’re going to recover so much as a single dollar bill when this is all said and done.

And please click on the Redfin link for this property and scroll to the bottom. Check out the What’s the Market Like for Condos section on the left. There is a $100,000+ gap between what downtown condos list for and what they end up selling for. Is there a better Greed Gauge in the world than that little baby?

Insanely, the list price line is on the uptick for December!

Is there any economic indicator—any!—that leads you to believe this devastating trend will suddenly reverse?

In conclusion, I don't have much faith in their ability to nab $295,000. I guess it is possible to find a knife-catcher fresh off the turnip truck, but that fool better saddle up with a cashier's check for at least $258,000. Anything less than that amount would result in further losses (can you believe this little apartment has wreaked such financial destruction?).

Frankly, I'm convinced further losses are inevitable, but I wish them the best.


  1. nice posting thanks for information.

  2. So how is the weather in Florida? Pick up any property? I heard the deals are smokin' hot if you can move the 'guests' out! Regarding this property, why do they always take the stove? I can understand the frig and microwave (kind of) but the stove? - that just bugs me (or was it full of bugs?) and they want top dollar for this place? Great post as usual and no way will it sell for asking price. Your blog is the best!!

  3. I looked at this place in mid-2000, even bid on a unit that was listed for $199K but went for $210K (to someone else - that was so much $$ for a 2br condo back then!). I liked it because the bare-bones HOA should have kept the fees low: no pool, few common areas, no security... I never did figure out what the fees got you.