This 2 bed / 1.5 bath house at 1621 Ashland, asking $1,650K, has been on the market about a month."REDUCED [a whole $25K]! ARCHITECTURAL RETREAT IN THE HEART OF SUNSET PARK, SANTA MONICA. STUNNING 2-BEDROOM, 1.5 BATHS, WITH INDOOR TO OUTDOOR FLOW [as opposed to the outdoors flowing in?]. UPDATED KITCHEN, YELLOW POLISHED WOOD CABINETS WITH CEMENT COUNTERTOPS, MODERN APPLIANCES AND WOODEN FLOORS THROUGHOUT. LARGE AND EXTREMELY PEACEFUL BACKYARD [between jets taking off]. WALK TO MAIN ST SHOPPING [1.2 miles], MINUTES FROM BEACH AND WITHIN THE SM SCHOOL DISTRICT...."
Note the repetition of architectural forms in this composition, the strong horizontal and vertical elements of the front canopy, the for-sale sign, and the high-voltage power pole and its cross-arms on the back alley. And is this an "architectural" thing, using all caps, or just poor form of a real estate agent "shouting"?
A close comp would be 1721 Pier, 2 bed / 1.25 bath, sold 7/29/05 for $1,208K and again 5/25/07 for $1,300K, only $350K less.
18 comments:
Hysterical. Please keep posting-your efforts and insight are much appreciated!
According to Zillow, these flippers paid $1,450,000 for it in October of '05.
I love when they refer to houses as "architectural". Aren't they ALL -- by definition -- "architectural"?
I wonder if it's the ignorant seller or greedy realtor who came up with this price. I guess a greater fool just might come along but I wouldn't count on it.
Just for the hell of it, what would the place rent for?
Westside,
I saw this home yesterday as I was browsing through the 90405 listings. From the looks of things, there are a bunch of single family homes which were purchased in the past 2 years and fixed up and are now back on the market. Price cuts seem to be the norm, but the amounts are mainly too small to get excited about...they are still leaving room for a big profit after commission.
It appears to literally be a stand off and once a few of these give in and try to undercut the competition it should get ugly.
2 yrs tax free profit (1650-1450)K= 200K = (90K realtor commision+110K mortgage Interest) = rent free for 2 yrs. why not?
Judging from the listings on Craiglist, it would probably rent for somewhere between 2 and 3 grand a month.
"2 yrs tax free profit (1650-1450)K= 200K = (90K realtor commision+110K mortgage Interest) = rent free for 2 yrs. why not?"
If we go with a 6% interest only loan on the $1,450K purchase price 2 years ago, we get $87K per year of interest paid. So that comes to $175K in interest over 2 years.
Then property tax at 1.1% comes to $16K per year. So that is $30K over 2 years.
And as you said, the realtor commission is almost $100K. So basically you are looking at $300K of total costs right there. Also, the kitchen says it is updated. Did they put any money into the place? Other upgrades, repairs, etc? How about insurance costs?
Rent is cheap and does not entail the risk that a flip does. I think when you really run the numbers, you see a $100K loss which is partially offset by about $75K if we assume this would have been rented for $3K/month. So the loss here is $25K if you buy these assumptions.
I am not including the interest tax break because I also did not include other maintenance, possible upgrades, water-sewer-trash costs (landlords pay these when you rent)or insurance costs. I figure they net out because you will most likely be hit with AMT anyways and lose a bunch of the tax break.
So no, I would not look at this as "free rent for 2 years"...I would look at it as a small real loss accompanied by a huge amount of uncertainty and risk. AND most of all, IT HAS NOT SOLD YET...so every price reduction it takes from here will be a real loss.
Sorry for the long post, but I think when you really look at the numbers closer, it becomes clear that owning a home is more expensive than it may seem on the surface.
Thank you WarChestSM for your insight & dedication.
Most of the 'Short sale & bubble innocent victims' are un-informed. Some realtors in westside didn't even know Zillow, Bubble blogs etc, let alone their clients.
westside bubble -- i've been enjoying this helpful site very much. i thought this particular entry was funny, especially because I harp on many of the same things you've noted. i always thought i was uniquely idiosyncratic. Thanks.
Thanks, Anon-the-first and Anon-the-last!
I had a lot of fun with this one - looking at the photo it just wrote itself. Graveyard humor of the inexorable bubble collapse?
"I wonder if it's the ignorant seller or greedy realtor who came up with this price."
Actually, it would be both since they are the same person, Mr. Wellman from Campbell Wellman Realtwhores.
Bubblewatcher: I believe that Webster's defines an "architectural" home as "stark," "uncomfortable," "angular," "cold," "resembling an industrial shed," and "impractical for daily living."
Westside Bubble: I've been lurking for a long time, and you're doing a great job. I especially love posts that are focused on specific home listings. I can't always follow the more indepth articles on economics (hey, I was an English major--I can barely add!), but I love reading about individual transactions. Sometimes those items say more than all the graphs put together.
dwr, what is your profession?
Um...
http://losangeles.craigslist.org/wst/apa/420597253.html
Same house.
One more time as a link.
"dwr, what is your profession?"
Something that doesn't involve lying on a daily basis in order to make a living.
dwr, come on, it is a very simple question, no strings attached, WHAT IS YOUR PROFESSION?
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