After 15 months on the market (so long they finally gave up and returned the staging furniture -- check out the new listing photos) and 12% in price cuts, they finally found a buyer.
Look, this is a beautifully restored house in a decent neighborhood (I'm being generous...this lower-income, rental-filled 'hood is marginal at best), but this buyer still overpaid. Straight up.
He could have waited a bit longer and saved himself a substantial chunk of loot.
$383 per square foot, although an okay deal on the surface, is at least $120 more per square foot than the going rate in this area. Yes, you have to factor in how the plethora of condos in this rental-inundated area affects the ppsft, but the overall point is that's a rich premium to pay. And it goes back to the aforementioned golden rule of real estate: Buy the crappiest house in the nicest neighborhood.
And look, I get that some people would rather let another jackass spend all of his loot painstakingly restoring their house for them instead of dealing with years of work and contractor headaches themselves (ever heard of Divorce Dust?), but it still doesn't make sense to buy the most expensive property (by a long shot) in a so-so area. Especially when the market is so soft.
And they didn't even get free government cheese!
Looks like the Greater Fool theory is alive and well.
Address: 1514 E Appleton St, 90802
Asking Price: $499,900
Year Built: 1907
Size: 3 beds, 2 baths, 1,148 sq. ft.
$/Sq. Ft.: $435
Purchase price: $245,000
Purchase date: 7/2001
On Redfin: 9 days
Down Payment: $100,000
Monthly Payment: $2,600
Income Requirement: $143,000
Description: ***A TRULY EXQUISITE 1907 REMODELED VICTORIAN PERIOD HOME **** WITH LOTS OF CHARACTER THIS HOME FEATURES, BEAUTIFUL HARDWOOD FLOORS, CUSTOM PAINTING THROUGHOUT, ABSOLUTELY GORGEOUS REMODELED KITCHEN, NEWER REMODELED BATHROOMS, INSIDE LAUNDRY, TANKLESS WATER HEATER, REMODELED BATHROOMS....WITH A GREAT LOCATION...CLOSE TO BEACH,PARKS,ART MUSEUM,SHOPS & RESTAURANTS. DRIVEWAY FOR 2 CARS, STORAGE UNIT IN REAR YARD.....A TRUE GEM*** A MUST SEE ****
****THESE PEOPLE ARE OUT OF THEIR MINDS IF THEY THINK THEY CAN GET HALF A MILLION FOR THIS THING****
****IT’S SO CLOSE TO “BEACH,PARKS,ART MUSEUM,SHOPS” THAT THERE WAS NO ROOM FOR A SPACE AFTER EACH COMMA****
****WHY PERFORM ALL THAT REMODELING WORK ONLY TO INSTALL GROSS TWO-TONE KITCHEN TILES?....I THINK THEY WOULD HAVE BEEN MUCH BETTER OFF WITH SIMPLE WHITE QUARTZ COUNTERS****
****"NEWER" REMODELED BATHROOMS? IT'S EITHER NEW OR IT'S NOT. WOULD YOU SERVE "FRESH-ISH" SALMON TO YOUR FAMILY? JUST SAY "REMODELED BATHROOMS " AND YOU WON'T HAVE TO ANNOY PEOPLE WITH THAT KIND OF IDIOCY!****
****OH WAIT, YOU DID JUST SAY "REMODELED BATHROOMS" WHEN YOU MENTIONED THE BATHROOMS ONCE AGAIN IN YOUR LISTING DESCRIPTION. YOU PROBABLY MISSED IT BECAUSE YOU WERE TYPING IN ALL CAPS LIKE A 13-YEAR OLD TWITTERING ABOUT MILEY CYRUS' PONYTAILS****
Ugh, I gave myself a headache just writing like that for a few minutes. How do realtors do that all day?
Man, this place is small for the money. And on a matchbook lot.
But the description was correct about one thing: This place has lots of character.
And it has a neat little patio, but why dump all that money into remodeling the house if you're just going to leave that moldy, rotting storage shed as-is? Ugh, what an eyesore.
But kitchen and shit shed notwithstanding, they did an excellent job on the renovations. The mix of original cues and modern updates work pretty well together. I mean, check the original windows mixed in with some recessed lighting:
A faithful restoration like that must make the Long Beach’s Historical Society happy.
Overall, I think this little house looks great and the details are phenomenal.
But, as they (I) say: “One man’s top-notch upgrades and personal style choices mean fuckall to a new buyer.”
The balance between restoration to its original build condition and sensible modernization is great, but most of the details and expense will go unappreciated--or ignored completely--depending on the personal tastes and needs of buyers.
For an example, let's look at classic cars. One of my favorite cars is the 1963 Lincoln Continental convertible. Ideally I’m looking for one with red interior and black (or white) exterior.
And even though this car was built more than a decade before I was born, I want something as original as possible. We’re talking whitewall tires, original hubcaps, original seats, matching motor (anything unseen by the naked eye, such as new, more efficient engine internals are just fine), original radio, etc.
I’m old school like that.
So, while perusing Auto Trader, I find a sweet black Continental with custom wheels, an incredible Pioneer DVD stereo with custom speakers installed throughout. The beautiful leather seats have custom suede inserts, and the black paint--which is the original color--has a subtle ghost flame job. The seller says he bought it for $15,000 and put another $20,000 into customizing it.
Plus, he expects to be reimbursed for the blood sweat and tears he put into the car, so he's asking $40,000.
But he fails to realize that not everyone has his particular (or peculiar) taste or ideas about what a classic car should look like. And some people, like me, would have to spend money tearing out those custom speakers and replacing the interior panels--which have been carved up--with the original pieces.
And the leather and suede upholstery, which he absolutely adores and cost him a pretty penny, isn’t really my thing. I’d have to install the original red vinyl.
The black paint, although faithful to the original factory specs, has a flame job ghosted into it, which obviously isn’t original. I’d have to repaint the entire car to get it back to original shape.
Now, given that he needs to sell his custom Contie to fund his retirement, he wants to get the maximum amount of money out of his “investment.” I, on the other hand, could not possibly care less about how much he spent building a dream car to his liking because we don’t even remotely share similar tastes and, as he's finding out, neither do most buyers.
So I lowball him at $20,000, partially because I smell blood, and partially because it will cost me a decent amount of money to get the car to where I will feel proud to sling it around Long Beach for the next 40 or so years.
Unfortunately for the seller, while the paint was drying on his dream ride, the economy went into the crapper. Suddenly, the classic car market is showing signs of weakness. His fellow Baby Boomers have lost 30-40% of their 401(k)s, and they’re ALL trying to unload their dream cars at the same time. But his fellow soon-to-be-retirees are a lot more desperate than he is, and they’re no longer worried about making a profit on their cars. In fact, they’ve given up the ghost on breaking even on what they’ve put into their rides. Now they’ll take whatever they can get just to get rid of it.
But because the potential buyers of these expensive (and maintenance-hungry) vintage luxury items are starting to lose jobs, there are fewer and fewer people coming around to kick the tires. Furthermore, without the ability to take out HELOC loans against their equity to fund big purchases (like our seller did during the Easy Money Borrowing Bonanza), the prospective buyers can only buy what their income will support. And because the economy is so bad, it’s getting tougher and tougher to get an auto loan for a third car.
So the seller has two choices: He can either capitulate and give it to me for what I offered, or he can accuse me of being a “vulture” and being "unappreciative" of his attention to detail and reject my bid. In his mind, his Continental is “special” and is surely worthy of a premium over the other Lincolns on eBayMotors.
And even if he turns me down now, capitulation will eventually come. As he spends another year or two languishing in the AutoTrader with no bites because he’s still asking a WTF price, he’ll see the market (and financing) for classics like his has tanked even further, and in his desperation he’ll be glad to get $15,000 for his “special” whip.
Finally, once I've taken ownership of this car and restored it back to its original condition, I might find that trends have changed and very few people care about the time and effort I spent making it as original as possible. Maybe the new thing will be whipple charging these things and installing airbags in the suspension. And a buyer with those tastes won't give a rat's rump about my efforts to keep it original.
The similarities to housing are pretty clear: Most buyers don't give a fuck how much that bathtub you love so much cost you. This is their house now, and they hate that tub because they prefer showers.
This seller on Appleton, although he did an excellent and painstaking restoration to his tastes and style, may find that the prospective buyers are interested in customizing it to their own individual tastes--and therefore couldn’t give a steaming shit about how much work and money went into customizing (yes, restoring something to its original condition is “customizing,” just like my Lincoln) it. They’re going to make the house their home and it’s going to cost them money to do so. And that is factored into what their willing to pay.
I'm getting long-winded, I know, but here's another example: One Halloween I went to a house party in LB where the owner had fully customized his garage into a badass man-cave. It had poker and roulette tables, a hand-built bar with kegerator, flat screen TVs, custom lighting and carpeting--it was impressive and probably cost him at least $10,000 in materials plus countless hours designing, painting, and building.
Cool for a visitor, but what about a buyer?
Personally I would much rather be able to protect my cars than play a few hands of Texas Hold ‘Em every other month. That’s just how I roll.
So just how likely do you think it is that I would pay an extra $10,000 (plus money for “time invested”) for his idea of the “perfect” garage?
Anyhow, this is a great house, and if it were in a better area (Belmont Heights) it might have a shot at selling for this asking price.
But a good rule of thumb is to buy the least expensive house in the best neighborhood, not the other way around. And asking $435 per square foot when the average Sold price per square is $200 (hell, the average List price, which is fueled by ferocious delusion and greed, is only just above $300!) makes this the most expensive house in the area by a long shot.
Not to mention a prospective buyer would need to make 4.2 times the median income to reasonably afford this place. I have a feeling those well-heeled buyers would be shopping in more desirable neighborhoods.
And especially when you consider this house sold for $245,000 in 2001, I find it hard to believe they put in $205,000 in upgrades. Because we all know it sure as hell didn’t appreciate that much. Either way, regardless of how much they parted with to renovate this place, they would be lucky to get fifty cents on the dollar in return.
Hat tip to Anonymous for the find!