The Magically Expanding House: FINAL UPDATE

Sold on 09/02/11 - $605,000

Well, that only took 400 days.

Look at this long, sad saga:

Sep 02, 2011 - Sold $605,000
Jul 15, 2011 - Pending (Backup Offers Accepted)
Jul 08, 2011 - Price Changed $609,000
Jun 17, 2011 - Price Changed $639,000
May 27, 2011 - Listed (Active) $649,000
May 27, 2011 - Delisted (Cancelled)
May 17, 2011 - Price Changed
May 09, 2011 - Price Changed
Apr 25, 2011 - Price Changed
Mar 30, 2011 - Price Changed
Mar 04, 2011 - Relisted (Active) $699,900
Mar 04, 2011 - Delisted (Hold)
Mar 04, 2011 - Relisted (Active)
Mar 03, 2011 - Delisted
Mar 02, 2011 - Listed
Nov 14, 2010 - Delisted (Expired)
Oct 05, 2010 - Price Changed
Sep 27, 2010 - Price Changed
Aug 27, 2010 - Price Changed
Jul 15, 2010 - Listed (Active)
Apr 14, 2010 - Sold $405,000

Hey, a $200,000 profit! This flipper must really know what he's doing!

Not so fast, punchy.

Setting aside the fact that flippers who know what they're doing actually, you know, flip houses instead of chasing the market down for 13 months, you need to delve a little deeper into his "profit" to determine how well he really did.

First, consider the carrying costs of roughly $28,000 while this thing languished on the market for more than a year. Second, he had to shell out $36,300 in sales commissions. Finally, I estimated the upgrades and repairs at about $120,000.

So he cleared roughly $420,000, for a true profit of a measly 15 grand. Sure, my renovation cost estimate could be too high, but when the list of upgrades includes landscaping, new bathrooms, windows, doors, roof, custom deck, granite counters, appliances, floors, tankless water heater, a new two-car garage and copper plumbing...I'm pretty confident in that price tag.

Remember, this is how the place used to look:

Anyhow, the point is that it looks like the flipper -- who nearly became a flopper -- didn't walk away with much profit for all that work, stress and risk.

So, things didn't work out as planned for the seller. But what about the buyers?

Well, they paid $405 per square foot, which is pretty good for the Heights. And considering the aforementioned upgrades, they won't have to put a dime into the place for a long, long time (other than replacing those cheap-ass laminate floors). Plus, they locked in an insanely low interest rate, putting the total monthly nut at about $3,000. It's doubtful that this place rents for that much, but if you include tax write-offs, they have a very manageable payment likely lower than local rents.

Plus, even if they overpaid, what choice did they have? There ain't shit out there. Believe me, I've been looking like crazy and the inventory situation is downright pathetic.

Go ahead and do a Redfin search for Long Beach houses between $550,000 and $650,000. I count 12 houses in the Heights. Five are pending and two are short sales (one just clocked 343 days, the other is 205 -- obviously not for sale). So, basically this buyer had just five houses in the Heights to choose from.

FIVE.

It's ridiculous.

And now that the Super Summer Selling Season(tm) is over, I'm expecting inventory to decline even further. This is just how it's going to be for the next few years. It sucks, but artificially restricting supply is the only way to increase demand.

I got really close to buying a condo a few months back, but to get it I had to overpay -- and the seller and I knew it. The reason was because this unit was the only game in town. Other nearby condos were either inferior, short sales not really for sale, or dreamers with equity trying to get wishing prices (some of which are now pulling their listings until next spring).

Anyhow, because this condo had very little competition, the seller was in the power position and wouldn't come down far enough to get a deal done. The attitude was, "Where else you gonna go, pal?"

And they were right. I needed to put some mustard on the deal to make it happen.

But I just couldn't bring myself to knowingly overpay in such a soft economy. Values certainly aren't going up any time soon, but my concern was that they would continue to go down -- and I wanted my offer to reflect that and build in some cushion against further deflation.

So, the deal fell apart.

Worse yet, it's under contract now. I'm dying to find out how much it sells for. If it's close to my last offer, I'll be really bummed out. I'll kick myself for not throwing in a few more bucks just to get in there. If the sales price is way more than my offer, I won't have any regrets.

But hey, life goes on. Unless something crazy happens this winter with banks unloading inventory, I'll have to put homeownership on the back burner until next spring. Not the end of the world. The weather is great, the future is bright, and there are more important things in life.

UPDATE: Jim the Realtor had a related post today, Buyer Frustrations.

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Price changed from $639,000 to $609,000

Ouch. This is getting uglier by the day. They've knocked off $90,000 from the list price and still no action. I mean, psychologically how do you think that feels?

This flipper is still ahead of the game considering he paid only $405,000 in April 2010, but that seemingly fat $204,000 profit cushion isn't as comforting when you consider the 15 months of carrying costs, the substantial money he sunk into the flip ($80,000? $100,000?), and of course paying out commissions ($36,000).

It's not like he'll lose money on the deal -- I think even in the worst-case scenario he'll break even. But I'm sure he'd like to gain some profit for his trouble, so with the fall and winter months (and his one-year MLS anniversary) approaching it would be wise to keep cutting.

But with a listing history like this, would you characterize this flipper as "wise"?

Jul 08, 2011 - Price Changed $609,000

Jun 17, 2011 - Price Changed $639,000

May 27, 2011 - Listed (Active) $649,000

May 27, 2011 - Delisted (Cancelled)
May 17, 2011 - Price Changed
May 09, 2011 - Price Changed
Apr 25, 2011 - Price Changed
Mar 30, 2011 - Price Changed
Mar 04, 2011 - Relisted (Active)
Mar 04, 2011 - Delisted (Hold)
Mar 04, 2011 - Relisted (Active)
Mar 03, 2011 - Delisted
Mar 02, 2011 - Listed
Nov 14, 2010 - Delisted (Expired)
Oct 05, 2010 - Price Changed
Sep 27, 2010 - Price Changed
Aug 27, 2010 - Price Changed
Jul 15, 2010 - Listed (Active)

+++++++++++++++++++++++++++++++

Price changed from $659,000 to $649,000

How's that market chasing workin' out for ya?

+++++++++++++++++++++++++++++++

Price changed from $675,000 to $669,500

This is actually the second price reduction in the last four weeks ($30,000 lopped off so far). Will it be enough to for this flipper to make money on his lipstick-on-a-pig makeover?

Well, considering the census bureau reported that homes for sale are currently the lowest they've been since 1967 (yes, you read that correctly), they might find an impatient, frustrated buyer willing to overpay.

For this kind of scratch I think a buyer can do way better, but in this inventory-free environment nothing really surprises me anymore.

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ADDRESS: 4512 East VERMONT St, Long Beach, CA 90814
ASKING PRICE: $699,900
BEDS: 3
BATHS: 2.75
SQ. FT.: 1,500
$/SQ. FT.: $467
LOT SIZE: 4,735 Sq. Ft.
YEAR BUILT: 1948
COMMUNITY: Belmont Heights/Alamitos Heights
MLS#: P772185
ON REDFIN: 4 days
DOWN PAYMENT: $140,000
INCOME REQUIREMENT (3.5x): $160,000
MONTHLY NUT: $3,700
DESCRIPTION: Remodeled 3 bedroom 2 3/4 bath Home with Contemporary Open Floor Plan and New Laminate Floors throughout. Light & Bright Living Room w/ Venetian Plaster Fireplace opens to Formal Dining Room. New Kitchen w/ Granite Counters, Pantry, & Stainless Steel Appliances including Gas Cooktop, Oven, Dishwasher, & Breakfast Bar opens to Dining Area and to spacious Family room which overlooks NEW Wooden deck with view of the Private Peaceful Backyard. Spacious Master Suite with a New Bathroom with custom flooring, Skylight tube, Vanity & oversized shower w/ seamless shower doors. 2 other custom remodeled bathrooms. There are many other NEW features such as Roof, Copper Plumbing, Tankless Water Heater, Ceiling Insulation, 2 Separate Heating systems, Doors, Paint, Top of the line Designer Sinks & Fixtures, Sod, Sprinklers, Drip System, and some Windows. Opportunity Knocks, Don't miss this Gorgeous Belmont Heights Home!!

Hooray For Intermittent Title Case!

Our featured property was purchased last April for $405,000, and now this flipper is trying to get his mitts on the $294,900 in profits he so richly deserves.

Now, to be fair, in 2010 this place was a certified turd pile:

Woof.

But, as with all flippers, the important question is whether this kitchen is worth the nearly $300,000 premium over the probate sale price:

"But El Bee, clearly they did more work than just the kitchen."

Really? Prove it.

Because although the listing description mentions a laundry list of desirable amenities and upgrades, these are the only other photos:

That's right, friends. A $300,000 markup and only four photos in the whole fucking listing.

I mean, how incompetent do you have to be to dump a bunch of money into flipping a property, jack up the price by hundreds of thousands of dollars, boisterously crow about all the upgrades and renovations, and then fail to, you know, actually include pictures of what you're trying to sell?

And please note that for $700,000 you don't even get a goddamn refrigerator. The balls on this guy.

I'm also curious about something I saw in the description from the 2010 probate listing: "Detached garage. Two rooms off garage that were previously used as additional bedroom and study."

So, since the garage is detached, and these two rooms are off the detached garage, does that mean these rooms are detached from the main house?

The reason I ask is because the public records (and the 2010 listing) clearly indicate this house is a 1-bedroom/1-bath spanning only 888 square feet, but the flipper's new listing is a 3/2.75 clocking in at 1,500. How did this house magically sprout an extra 612 squares?

It appears this dude is trying to include the two rooms off the garage in the total square footage. It's worth noting that if you calculated the price per square foot according to legally confirmed figures in the county assessor's records, the current (and relatively palatable) $467 per square foot would jump to a whopping $788! Motive, anyone?

That seems really fishy. If you're thinking of plunking down nearly three-quarters of a million dollars for this place (HAHAHAHAHA), definitely do your homework and ask the right questions.

Assuming the 1,500 square feet is somehow legitimate, I think a minor price reduction will garner a sale. It's on a relatively big lot in a prime area, has a wealth of upgrades (allegedly), and I think a working couple, forced to wait five years for this massive housing bubble to deflate and return prices to reasonable levels, will look around at the dearth of quality Long Beach inventory and simply bite the bullet and overpay for this flip job.

I myself would feel nauseous paying nearly $300,000 for upgrades that cost, at most, $120,000, but that's just me.

UPDATE: Listing photos finally added.