When buyers look for properties, realtors often try to intimidate them into making higher offering prices in order to avoid an "insulting offer." How exactly making an offer on a property is insulting is beyond me, but the ruse seems to work, so realtors use it. However, isn't the opposite also true? Isn't it possible for an asking price to be so high, so ridiculous that it insults the intelligence of every buyer in the marketplace? I think so.
It was suggested in the comments on a previous post that perhaps our series on WTF pricing could shame sellers into setting reasonable asking prices. When an asking price is beyond ridiculous, there should be a sense of shame for the insult to potential buyers everywhere. There is a lack of respect in a WTF price: A lack which feeds the beast of schadenfreude currently dining on flips profiled by our blog. Just as realtors hope the fear of insult will cause the buyer to raise their offer, maybe the fear of insult will make a seller pause before listing an embarrassing asking price.
Today's WTF award: Location, location, location.
Perfectly positioned to maximize road noise between the 405 Freeway and Michelson Drive is the small, old 3 bedroom offering for a mere $900,000:
Asking Price: $900,000
Purchase Price: $460,000
Purchase Date: 12/5/2002
Address: 13 Banyan Tree, Irvine, CA 92612
Beds: 3
Baths: 2
Sq. Ft.: 1,714
Lot Sq. Ft.: 6,500
Year Built: 1973
Stories: 1
Type: Single Family Residence
County: Orange
Neighborhood: University Park
$/Sq. Ft.: $525
MLS#: P566551
Status: Active on market
On Redfin: 80 days
From Redfin, "BEAUTIFUL HOME!!! EXCELLENT SCHOOLS!!! Large backyard with built in fire pit. Real distressed maple wood floors in kitchen and living room. New copper plumbing throughout. New gas range, kitchen sink and dishwasher."
.
.
So is this really a WTF price? The asking price per square foot of $525 is the one of two properties in all of University Park over $500 -- even including the small stuff which warrants a high per SF price. The other property, 46 Sequoia Tree Lane, has been on the market for 305 days. Based on a cost per square foot metric, this price is way, way too high.
Let's see what $900,000 will buy in University Park today:
26 TAHOE
Irvine, CA 92612
Price: $879,900
Beds: 4
Baths: 2.5
Sq. Ft.: 2,778
Lot Sq. Ft.: 2,880
Year Built: 1976
Stories: 2
Type: Condominium
View: Park or Green Belt, Trees/Woods
County: Orange
Neighborhood: University Park
$/Sq. Ft.: $317
MLS#: S474582
Status: Active on market
On Redfin: 115 days
This unit has an additional bedroom, 1000 SF of additional living space, and a beautiful kitchen for $20,000 less.
Or how about this one:
53 MANN ST
Irvine, CA 92612
Price: $849,000
Beds: 5
Baths: 2.5
Sq. Ft.: 2,291
Lot Sq. Ft.: 5,060
Year Built: 1965
Stories: 2
Type: Single Family Residence
County: Orange
Neighborhood: University Park
$/Sq. Ft.: $371
MLS#: P568091
Status: Active on market
On Redfin: 71 days
This one has two additional bedrooms, 500 SF of additional living space, and an upgraded kitchen for $50,000 less.
.
.
For being a greedy seller who needs to experience the shame for insulting the intelligence of buyers everywhere, the seller at 13 Banyan Tree wins our WTF award!
Originally posted January 9, 2007
Address: 3 Redbird, Irvine, CA 92603 (Shady Canyon)
Plan: 4240 sq ft - 4bd/4 and 2 .5ba
MLS: U6601263 DOM: 238
Sale History: 3/8/2006: $3,950,000
4/15/2002?: $1,842,500 (From Zillow)
Price Reduced: 06/28/06 -- $4,195,000 to $4,050,000
Price Reduced: 08/23/06 -- $4,050,000 to $3,950,000
Price Reduced: 10/13/06 -- $3,950,000 to $3,850,000
Current Price: $3,850,000
An astute reader emailed me about this flip last week (Thank you!). Here we have a Plan 2 in The Villas of Shady Canyon tract built by Taylor Woodrow. This is one of the few (3?) semi custom tracts in Shady Canyon. The rest of the homes are all custom. It's a beautiful home and was originally owned by baseball power hitter Mark McGwire.
It appears that a flipper purchased this home from McGwire for $3,950,000 on 3/8/2006 (good timing for Mark but not for our flipper). It was listed back on the market about 2 months later for $4,195,000 with John McMonigle (recent article). At that price, the flipper would barely break even after selling costs.
Over the course of 2006, the flipper lowered the price three times. These are pretty significant dollar reductions. Also, from what I can tell off the MLS listing, this property is vacant and my guess is that the flipper never moved in. I also see a loan for about $1,500,000. The HOA dues are about $560/month.
Excluding carrying and opportunity costs (but assuming 6% in selling costs), if sold at the currenty asking price, this seller is facing a loss of over $330,000!
Private remarks also state: "CLIENT IS OFFERING $20,000 TO ANY BROKER (PARTICIPATING IN MLS) WHO BRINGS IN A BUYER THAT GOES INTO CONTRACT AND CLOSES ESCROW ON PROPERTY." I suppose that is on TOP of the 2.5% the broker will receive for bringing in a client.
This is definitely the biggest $ flop we've seen in Irvine. If anyone has more insight into this (or has information contrary to what I've found), please post.
Anyone care to guess if the house will sell quicker if Mark McGwire is inducted into the Hall of Fame today?
UPDATE #1 - June 8, 2007
Thanks to a tip from a reader, I've come to find out that the price on this home has been reduced again:
MLS: U6601263
Price Reduced: 05/22/07 -- $3,850,000 to $3,695,000
Excluding carrying and opportunity costs (but assuming 6% in selling costs), if sold at the currenty asking price, this seller is facing a loss of over $476,000!
Not an exact comparison.. But there is a Plan 1 on the same street (19 Redbird MLS #: U7000758) asking $3,250,000. It's been on the market for 110 days. I don't think anything has sold in Shady Canyon in the last 6 months. Anyone have more info?
Originally posted April 26, 2007
Address: 260 Dewdrop, Irvine, CA 92603 (Quail Hill)
Plan: 830 sq ft - 1/1
MLS: U7000571 DOM: 84
Sale History: 11/21/2005: $445,000
10/23/2003: $251,000
Price Reduced: 03/22/07 -- $445,000 to $434,900
Current Price: $434,900
Many thanks to the reader who tipped us off to this property! Here we've got a Plan 1 in the Jasmine tract in Quail Hill. It was most recently purchased for $445,000 with 100% down (both loans from Greenpoint) on 11/21/2005. $445k for a 1bd? Yikes!
Fast forward about 14 months and the property is back on the market. Originally listed at $445k (hey, it should be worth at least what I bought it for right?), it was reduced a little after 1.5 months. Although this property does not qualify for a Knife Catcher award, the owner (or will it be the lender in this case?) is definitely bleeding money every month as the property is listed as VACANT.
The property taxes for the 2005 Roll Year were delinquent. Now, the website is showing them as paid on 3/26/2007. Also, the first installment for the 2006 Roll Year is also Delinquent. About $7k in property taxes (1st and 2nd installments) are due by 7/2/2007. It looks like they are trying but they probably got in over their heads.
The original owner (the buyer in 2003) made quite a nice profit in 2 years. From what I can see on title, it looks like they may have put up to $80k down on that purchase. So the original owner bought a $250k property, may have put $80k of their own money down, owned the property for about 2 years, got lucky with the timing and price of the sale, and made around $170k. Contrast that with the current owner who bought a $445k property, put $0 down, owned the property for 1.5 years, got unlucky with the timing and price, and will lose at least $36k (assuming 6% in selling costs)!
UPDATE #1 - June 8, 2007
Here's a quick update. The price was reduced again a few days after the initial post.
MLS: U7000571
Price Reduced: 04/30/07 -- $434,900 to $428,900
The loss will be about $42k if we assume 6% in selling costs. This one has gotta be going back to the bank.
ARTIST: Dire Straits
TITLE: Money for Nothing
I want my, I want my MTV
I want my, I want my MTV
Now look at them yo-yo's, that's the way you do it
You play the guitar on that MTV
That ain't workin', that's the way you do it
Money for nothin' and your chicks for free
Now that ain't workin', that's the way you do it
.
.
Many people have horror stories about dealing with their local homeowners association (HOA). Hopefully, some of these people will regale us with their stories in the comments to this post.
Most of Irvine is homogeneous: this was intentional. Homeowners associations are formed to maintain facilities in common ownership, and to maintain property values in an area through the enforcement of covenants, conditions & restrictions (CCRs). It has been shown, painfully, that individuals acting without governance will allow their properties to deteriorate, appropriate public spaces, and express their individuality in ways which harms neighborhood values (anybody remember this clip from Cheech and Chong's Next Movie?). In this post, I want to show what can happen -- even in Irvine -- when the HOA is weak, or does not exist at all.
The property above is located at the intersection of Fulton and Lewis in Northwood. Perhaps you find it attractive? The color scheme is well executed, but the selections would be outside the norm for an Irvine property. You would never see this in Westpark, for instance.
I am sorry you can't get the full impact of the colors in these photos, but I can assure you that this house catches your eye when you drive on this street.
The real case to be made for HOAs in Irvine comes from this property on Ecclestone Circle. First, look at the size of this thing. Even in a neighborhood of large homes -- which The Ranch is -- this home stands out as being enormous. When I first saw it, I thought it was multi-family.
Do the words "starter castle" come to mind when you see this place? The property at 5 Eccelstone Circle is for sale. Do you think this house is helping or hurting its resale value?
This is the view from the neighboring street. This place dominates the scene in other neighborhoods.
.
.
Homeowners associations have gotten a bad reputation because they are often taken over by individuals of limited competence or those with a Napoleon Complex. These criticisms aside, Homeowners associations provide a value-adding service which, in my opinion, is worth the hassles they create.
When I introduced WTF-Were-You-Thinking Prices, I said to qualify for this award, the price needs to be beyond market and beyond wishing prices. To obtain the WTF award, the price needs to be so high that I actually laughed to myself when I saw it.
To illustrate what I meant, this post will illustrate 3 properties: One is for sale at a realistic price in today's market (a price which still makes me want to Laugh Out Loud); one is for sale at a wishing price that has no chance of happening (the Oh-My-God price), but at least it represents some tethering to the market; and the final one is so high, so far outside of the market that you have to scratch you head and ask, "WTF?" (you all know what it means...)
.
.
.
LOL Property:
Asking Price: $439,000
Purchase Price: $392,000
Purchase Date: 3/10/2005
Address: 15 Lakepines, Irvine, CA 92620
Beds: 2
Baths: 1.5
Sq. Ft.: 1,204
Lot Sq. Ft.: 868
Year Built: 1977
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Northwood
$/Sq. Ft.: $365
MLS#: P575387
Status: Active on market
On Redfin: 28 days
From Redfin, "Large Two Bedroom Townhome with Full Bath Upstairs and Seperate Sink in Master Bedroom, 1/2 bath Down. Fenced Patio. Fireplace in Livingroom. Smooth Ceiling. Ceiling Fan. Storage in Attic, Wood Floor, Community Offers Tennis Courts, Two Pools, Walking Distance to Schools, Northwood High School, No Mello Roos, Must See."
.
.
I don't think they will get $365 SF for this place, but it is still within the realm of possibility. There is a major lack of buyers, but those that are buying may be willing and able to pay that price.
OMG property:
Asking Price: $519,000
Purchase Price: $407,500
Purchase Date: 6/22/2005
Address: 123 Lakepines, Irvine, CA 92620
Beds: 2
Baths: 2.5
Sq. Ft.: 1,204
Lot Sq. Ft.: 828
Year Built: 1977
Stories: 2
Type: Condominium
View: Water
County: Orange
Neighborhood: Northwood
$/Sq. Ft.: $431
MLS#: S488096
Status: Active on market
On Redfin: 16 days
From Redfin, "UPGRADES EVERYWHERE! MUST SEE! Granite countertops, beautiful cabinetr y, stainless appliances, slate tile, fireplace, all new window coverings, all new baths & fixtures w/ jetted tubs! Fresh paint, slate floors, cathedral ceilings in master, walk-in closets w/ organizers, additional loft-great for office or storage. Canopy on patio provides a perfect retreat to enjoy the lake view! Too good to pass up!"
.
.
The only difference I can see between this unit and the one being offered for $80,000 less (almost 20%) is the upgraded kitchen. Do you think that is worth $80,000, or is this seller clinging to a wishing price? I might have even given this seller a WTF award, but he was outdone by his neighbor...
WTF Property:
Asking Price: $570,000
Purchase Price: $365,000
Purchase Date: 12/1/2004
Address: 224 Pineview #266, Irvine, CA 92620
Beds: 2
Baths: 1.5
Sq. Ft.: 1,204
Lot Sq. Ft.: 804
Year Built: 1978
Stories: 2
Type: Single Family Residence
View: Water
County: Orange
Neighborhood: Northwood
$/Sq. Ft.: $473
MLS#: P574560
Status: Active on market
On Redfin: 33 days
From Redfin, "RESORT LIVING, OVERLOOKING STREAMS. BRIGHT & SPACIOUS 2 SKYLIGHTS FIRE PLACE, GARDEN WINDOWIN KITCHEN, 1 CARPOT & 1SPACE, NORTHWOOD HIGH, NO MELLO ROSS, ASSOC POOL, TENNIS, NEWPAINT."
This guy must be smoking that CARPOT, or maybe he was sniffing the NEWPAINT. Whatever his malfunction, this price is ridiculous. Why would a realtor even take this listing? There are no upgrades here. The kitchen in the picture appears to have white tile from the 80's. Here we have a unit being offered for sale for $131,000 (30%) more than an identical unit -- an identical unit which is probably also overpriced. He even managed to price higher than another crazy neighbor. How would you even come up with that $570,000 number? I am dumbfounded. Maybe the new litmus test for the WTF award should be a complete sense of confusion on my part as to what the seller was thinking? WTF?
