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Saturday, September 18, 2010
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34 comments:
Is it just me or is it a little strange that a flipper appears to have taken a house and either made it smaller or tore it down and built a new house smaller than the old house.
Here is the house in 2006 old house
and here is the house currently < ahref="http://franklymls.com/FX7410565"> new house
Obviously they made the house look nicer, but I am still a little surprised that it looks smaller now...
Why wouldn't a buyer fixate on how much profit the seller is making? I would. If the seller is making a $100K+ profit and its only been a year on a $400K home, then something is a miss. House prices increase at the rate of inflation. The whole concept of "house priced fairly" has been thrown out the door in the last decade due to government intervention. Houses are thought of as investment vehicles..not as places to live.
VA-
I wasn't worried about the flippers profit. I was just surprised the flipper made the house smaller. Usually making a house smaller does not help the flippers profits. I think the house looks nice although my best guess is that in the area where it is the person will not get close to the current asking price.
Although as I said I was less worried about the price and profit and more just surprised about their decision
hb,
I'm not sure that the new house is actually smaller than the old house. I looked up the address in FX Co's Building Permits database and the demo permit only called for demolishing the structure and leaving the foundation. One of the other permits indicates that a new house was to be built on the existing foundation so the new house must have a similar sq footage to the old one.
Hayfield-
I agree the footage is similar. The houses appear to have the same base, but on the old house there appeared to small additions on each end. The additions only look to be a couple of feet on each side.
Even if the house is the same size it is odd to tear down a house and put a new house that is the same size in its place. I would have thought it would be cheaper to renovate than start from scratch, but maybe I am wrong.
actualy that house appears to have slightly expanded they went from 4/2 to 4/3
it appears they raised the roof
and i suspect added a bathroom.
not a good investment i think.
Cool,so I pop in to see what is up this morning... and I get yet another thread of deleted posts.
leroy,
Several of the deletes were mine.
Leroy-
I was also curious what that was all about, I didn't see any of the original comments.
All-
I found this article from CR interesting housing data
It really shows how long it is going to take before mortgage debt and household equity gets back to normal. Mortgage debt will need to shrink by almost $2Trillion. In addition the average person has only ~40% equity compared to a more normal ~70%. Based on how slow these things move it will likely be at least a decade before we are fully recovered from this housing bubble.
hb, leroy,
You didn't miss much. I was on a FMV vs. improvement costs "tirade". Nobody was interested. Many here believe that what the seller paid and the dollar cost of renovations should equal the value of the property.
I disagree and it can go either way. I recall looking at one ridiculous house in Dunn Loring back in the day. The seller had spent thousands on ugly crap that devalued the place in my mind. The seller insisted on adding up all the crap to arrive at the asking.
Ace was talking about the Spout Run area house and stating that the owner of 2 yrs would have to prove 200K in improvements to justify the asking price.
The market determines FMV. There is no relevance to the "profit" element. Boycoting (sp?) a property where the price has gone up (in a flat market) is an individual choice - but one not always related to FMV.
It's kind of like saying that your boss doesn't deserve his salary when the market (labor, in this case) says otherwise.
I guess it's just human nature to not want someone to profit at your expense, but it is not always rational. And, let's face it, some people spend alot of time and effort to get something well undermarket.
I'm not saying what that particular house is worth (I haven't a clue), but I really don't care what the seller is making as long as I am getting the price I want.
I will admit to alot of kicking myself over the years. Ex. something I could have bought for 700K in 2003 is now on the market (virtually unchanged) for 3.2mil. %$#@#$%!
VA-
I agree with you the persons profit should not have much(anything) to do with what a property is worth. If a flipper gets an amazing price on a place they should make a good profit. The problem is many of the amateur flippers are not getting good prices, they are doing bad work and overcharging for it. Usually we end up being correct the property does not end up selling where the flippers want it.
So although the persons expected profit should not come into play, it is relevant if you assume that the price they paid was fair market value rather than the price they are trying to get.
VA_Investor,
You claimed,
"Ace was talking about the Spout Run area house and stating that the owner of 2 yrs would have to prove 200K in improvements to justify the asking price."
I stated nothing of the sort, as can be verified by anyone who goes back to the thread.
My posts are pretty consistent in discussing my belief in how markets work to the disappointment of some sellers and buyers.
In case my original post was not clear, let me elaborate. With regard to the Peary house, my point was that *IF*:
a) the seller did very little to the house (since the Realtor's own description said nothing about those improvements) yet wants a 27% increase in price since 2008, during a time when FMVs have been dropping for most properties in this range in similar Arl. neighborhoods, and
b) the seller gets that price, then
N. Arlington is not "toast" and in fact is on a dramatic upswing, at least in the neighborhood of that house.
The Arl. Co. link on listing indicated that the seller had paid well above assessed value for the property in 2008, so this doesn't seem to be a case of a smart negotiator getting a great price then.
HB then pointed out that it appeared work HAD been done, and dc2 noted that the 2008 price was certainly no bargain and that the asking price seemed out of line with the selling prices in the market.
So my inference is that the Realtor just was too stupid or lazy (my interpretation) to clarify what had been done, leaving buyers to wonder why the seller thinks there had been a 27% appreciation in the FMV of the seller's house during a down time in the market, esp. in that price range.
It's all about FMV. The relevance of the $200K is that buyers in this price range in particular are not stupid enough to pay a premium just because someone slapped paint on walls--or even if someone puts in expensive reno's if they aren't to this range of buyers' tastes and quality demands. Further, there is more inventory relative to buyers than in other ranges, so they have more market power. They will demand $1.27 mill. of value relative to their alternatives on the market before they pay it.
one last point - although this should be obvious from the other post - if in fact the 2010 seller put in a lot of the improvements, it's entirely possible she will get her asking price. This is because at least one buyer will agree that, although the market hasn't moved upward 27% since 2008, the house has been improved enough since then, so that now the house is worth a lot more. So my argument is not that the 2010 seller won't get the $1.27 mill.
"will agree" should have been "could agree"
Ace,
You got me. I forgot that you had concluded that the 2008 price was "fair"; never having seen the place in 2008 and knowing, basically, nothing about the house except that the current listing mentions no upgrade "worth 200K".
And I'm not being specific to this one house. Just my observation about the general line of thought here.
VA_I,
Well, I'm really not sure what I'm being accused of this time. My posts stated explicitly *IF* X is true, then my conclusion is Y. If the X conditions do not hold, then my conclusion is not Y. It's not necessary for anyone making that argument to try to show that "I know X conditions are true." If your argument is that I can't make this argument without seeing a property in 2008, that's simply not correct.
It seems to me that anyone who wants to argue that a market will produce a $200-270K profit (and I mean true profit) for one particular seller, when other sellers of similar properties are losing money, has the burden of explaining exactly how a market would permit that to happen for that particular house. And you would need to do so with some knowledge of buyers in the $1 mill. range and how Arlington in general has behaved in that range for multiple years.
If you're going to talk in general terms, go ahead, but please don't misstate my positions or use those as a straw man/woman.
Sorry to belabor this - my arguments are not about what price is "fair" or "right" in some moral sense. My arguments concern whether the market is likely to produce the outcome that the Peary seller wants. I'm using "fair market value" in the way accountants and economists use it.
Ace,
I accuse you of nothing but asserting that a seller must justify the profit. Simply not true. The market sets the price. If a potential buyer doesn't agree with the ultimate sales price, so be it.
An appraiser does not take the prior sales price, adjust for inflation and arrive at FMV. Whether a seller paid too much or too little has no bearing on FMV.
If we are on the same page, then I apologize for the misunderstanding.
OT,
Are Frankly's "veiwing/viewed by" numbers for the entire MLS or just pertinent to Frank's site? In other words, are these "view" only people who viewed the listing through Frankly?
http://bit.ly/cX9hkE is market stabilizing? I don't think so.
cheryl
they do behave this way.
my old place was the fugliest in oklahoma i fixed it up and haf several prospects mention the previous sell price.
I'm pretty sure his numbers only represent visitors to his franklymls site.
Jeremy-
Thats what I also thought. I don't think he would have access to who saves listings on the actual MLS. It is much easier for him to track traffic on his own page.
Ace,
A 2008 tax assessment may or may not correlate to the value of the house as I am sure you are aware. And, yes, many buyers will use that data to determine current "value". I just happen to think this approach is lacking.
Pat,
I've been there there, done that. As a buyer, I want to know past sales to see how much "room" is available to negotiate.
As a seller, I have been approached with the "you only paid X" arguments. I tell those folks to move along. I've even been told "the house down the street sold for y, how can you expect to get z"?. I'll respond with - go buy house "y" and, "oh that's right it sold in one day".
If something is over-priced, it won't sell. It has nothing to do with the seller's profit.
VA_Investor said...
As a buyer, I want to know past sales to see how much "room" is available to negotiate.
This seems to directly contradict your "stubborn seller" statement that directly follows it.
As a seller, I have been approached with the "you only paid X" arguments. I tell those folks to move along. I've even been told "the house down the street sold for y, how can you expect to get z"?. I'll respond with - go buy house "y" and, "oh that's right it sold in one day".
So basically you're saying that as a buyer you can expect to get negotiating room, but as a seller you expect people to take it or leave it. How can you chastise other buyers for trying to negotiate a better deal when you do it yourself?
If something is over-priced, it won't sell. It has nothing to do with the seller's profit.
This part I agree with now - however lots of overpriced stuff sold during the time of loose lending when people too dumb to manage money were given way more than they could ever hope to pay back.
Jeremy,
well, as a buyer you can just make a low-ball offer if you know that seller has a lot of neg. room. no need to directly mention that fact. in my opinion it is much more reasonable to be humble but firm during negotitations than to be pushy.
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