The Spring Selling Season might need a new name for 2008 – Spring Slashing Season.
Sales are a major disappointment. Bursts of warm weather haven't heated up buyers' motivation.
And while that translates to a steady drumbeat of price-cutting that could make for a daily feed all its own, what's drawing MBC's attention is a wave of big-dollar cuts in just the last few days.
But first, before we cover those, let's pause a moment to wave some positive vibes over to The Farmhouse, 570 27th, which is now in escrow after – achem – $1 million in price cuts over the course of 13 months. Yes, yes, keep cutting and one day they'll knock on your door.
The Farmhouse began at a wish price of $3.899m in mid-March 2007. It had cut a total of $600k by September (see "The High End Gets Lower") and recently had trickled down to $2.899m. When all's said and done, that's still one pricey home (we don't have the deal price yet), just not as pricey as they penciled it in to be. Note this: a few months back, Blake Roberts – a huge fan of the home, as you know – said this of the Farmhouse:
[T]his is just speculation, but I'd guess that the builder wouldn't have (or couldn't have) moved forward with the Farm House project had he known it would end up selling close to $3,000,000 bucks.And that was when the list price was $3.199m.
More than a million bucks were chopped off just a few listings in recent days:
132 2nd, a large, newer home on the walkstreet right at Manhattan Ave., cut $305k to $5.695m. Word here at MBC previously – in comments – was that it had been in escrow well above $6m before hitting the market in late March;
- 332 20th, an impressive new home at the top of the 20th St. walkstreet, began at $4.795m but has just cut $300k to $4.495m;
- 923 1st chopped $220k more this week and is now down $623k from its start (now $7.375m) – no huge surprise because it never was an $8m house (see "Unpredictable");
- The smallest cut we'll feature was at 661 26th, a mere $120k cut that allowed it to leap behind The Twins on Poinsettia, which had cut to $2.599m – now 26th is at $2.579m; and
794 27th (Pacific/27th) took an amazing cut of $200k more this week and is now down $500k from its Feb. 6 start at $2.599m (now $2.099m) – most shocking because the home was purchased for $2.5m just 2 years ago (May 2006). Hey, someone is trying to sell this house!
28 comments:
you know, what's happening at 794 27th is interesting. i've played in charity golf tourneys with quite a few celebrities over the years, and one thing that Bruce McGill told me once really stands out.
he said it took him 15 years in the business before he really felt comfortable buying a house and setting down roots in LA. this, from a guy who got off to a hot start in the 70's (Animal House) and had probably made 50+ films in his career.
the problem was/is that for supporting & character actors the compensation is too meager (couple hundred grand per film) and too lumpy (you can go years without a decent payday) to justify big, expensive mortgages. you really must finance your life with equity, not debt.
i'm not saying that this is a distressed situation. i have no insight into the situation. but it seems to me that the pricing and marketing strategy of this house has been a bit strange (high initial list, touting the celebrity ownership, leaking the details to the LA Times, etc). it suggests a real desire to get the house sold quickly.
Update from Redfin:
723 1st is now a NEW listing and... its price rose to $7,595,000.
I think she is much more than a character actor. She has been the lead in numerous films and television shows (West Wing).
Although, I agree touting this as celebrity owned is a little much.
I just love the house but hate the Pacific part of it. I would be depressed hearing traffic noise like that for the amount of $ you'd pay.
Anyone,
Let's get down to the numbers!
What were the total number of closed sales in MB (all of MB) in April? How many new escrows were there in MB in April? What were the figures last year?
Spoke to our mortgage broker; he's had clients who were rejected putting 20% down on a $2 million dollar house. You need to put down at least 25-30% (which is what I think most people should have been doing all along). This will definitely affect the number of buyers out there!
Dear Huggy,
That was some prescient advice you gave Mookie. Thank you for coming off your mountaintop to deliver the most obvious piece of drivel ever posted on Manhattan Beach Confidential. I find it comical that Huggy fancies himself erudite. Huggs, I've heard belches more erudite than you. Yes, now you'll launch into your hoary "COTC/angry renter" harangue. Wrong Grandfather Clock, I'm an owner of multiple properties (commercial and residential) and am quite certain I could buy you many times over.
Just remember folks, realtors, by nature, are anti-buyer. The more you pay for a property, the more the listing agent and the representing agent make. Mookie, don't let these charlatans shame you into making an offer that makes you uncomfortable -- no matter how much they groan.
BondInvestor- It look like it makes you feel better about your position in life to rant about celebrity and speculate what might be going on here. Maybe she has houses all over the world and a $500k loss is nothing to her. Matt Leinert recently sold his home in Phoenix for about a $500k or more loss. Probably wasn't a big deal for him, and this may not be a big deal for her. But continue to make yourself feel better. Hope the bond market is treating you well, because it doesn't appear to be with your blather that contributes nothing to this blog. These are the types of worthless comments that should be deleted by MBW.
10:12am - although I agree with you about bondinvestor being a moron, i don't agree with the other parts. it doesn't add up. taking a $500k loss is a lot worse than the debt service of holding the home. why would anyone make the decision to drop $500k now instead of $15k a month. discount future cash flows, and it is a bit more than 33 months of flows. what would you do? drop $15k a month and hold tight for a rebound? or drop $500k now and not even think about amortizing it out? im no 'bondinvestor', but i can figure out what cash flow scenario i like better!
10:45- You forgot to factor in the declining market, especially given the location on Pacific. That alone could be over $200k in the next year or so. So I disagree with you. Plus factor into that the house may never get back to the $2.5M paid in 2006. It could happen in 7+ years, but why wait. Take a loss now and offset it against any other gains, because she can probably say it was an investment property potentially.
MBW I'm very happy the farmhouse finally sold. I walked by the other day and was very impressed. If it was in the Trees, who knows what it would've gone for. I hope the developers made some money because they really deserve to win for creating a beautiful, tasteful house. FYI I have no connection to this home so consider this before you smash my head on the curb.
It also makes sense to sell at a loss if one is concurrently buying another property - and preferably at a discounted price similar to, or at a greater discount than the property being sold.
Anon 11:46,
The farmhouse IS in the trees. What house did you walk by?
9:01am - Your friend obviously has other issues than the 20% down.
I know you can do 90% with Wells Fargo.
The limitations come with the amount of 1st vs. 2nd mortgage. You can only write off the interest on $1M of mortgage debt on primary and secondary residences combined. That is probably the issue your friend ran into. I.e., in order to avoid a second mortgage they had to come up with more down or their income would not support the second mortgage.
Wells is writing 90% first's in our area? I highly doubt it unless the appraisal comes in well below recent comps. However, if they are, I'm selling my stock. I'm going to call my officer (I do my business banking there) and inquire...
No. They will do a $1M first with financing up to 90% - to qualified buyers of course. BTW, they are still the only triple-A rated bank in the country. You should probably keep their stock.
11:53 Sorry, I meant the hill section. This is what happens when I start drinking before noon.
"MBW I'm very happy the farmhouse finally sold. I walked by the other day and was very impressed. If it was in the Trees, who knows what it would've gone for. I hope the developers made some money because they really deserve to win for creating a beautiful, tasteful house. FYI I have no connection to this home so consider this before you smash my head on the curb."
LOL. Let's credit the developers who lost their shirts on this out of place white elephant.
It's funny what different reactions the Farmhouse brings out. I've toured it a few times with different people, some who were really wowed and some who found it strange and impractical. (Most of the comments here have been downbeat.)
I never saw it staged (I don't think it ever was) but the layout problem is that one, long, giant living space into which you need to put your casual & formal dining plus all your living area. Even if that room is the length of a basketball court (kinda), it's going to shrink when you chop it up with furniture and try to give it several functions.
There are reasons the home sat, and there are reasons they're getting $2.5m+ (I still don't have the deal price).
I am afraid that the experience is a strike against edgy, "different" development and in favor of lowest-common-denominator homes, and we've seen the blight those create, too.
I have a question, and if you all could please answer it thoughtfully.
I know a few RE agents in town, and one has taken me through about 5 homes during the last few years - the last one being 7 months ago. She has emailed me with possible listings a few times as well.
How loyal do I have to be to her? I've been doing my homework here, and going to openhouses on the weekend on my own, finding the houses through the Beach Reporter and this site.
If I see a home I like that she did not refer me to and I found on my own, what's the protocol? I feel I might get a better deal if I use the listing agent.
Is it really that important to have a different agent and what are 'The Rules' when it comes to sticking with a broker?
Thanks
Huggy - I appreciate your color and thanks for your response. I agree, my realtor would probably puke and be reluctant to show that bid. I also agree that the seller would not sell at the price I referenced.
Let me frame my question another way bc I'm trying to rely on your expertise (again, not blowing smoke). If, and I mean if, you liked 30th Street, knowing what you know about the current state of the market, knowing the comps of 32nd and the other one you mentioned (as well as any others you didn't), what would you be willing to pay if you were to buy it. You have expertise that most of us don't have so I feel confident that your price would be an accurate, or close to accurate state of the market.
Thanks
Anon 4:01 I respect your strong point of view in regard to the farmhouse, but what's your idea of an aesthetically appealing house in that price range?
5:36pm - Unless you signed an agreement with this agent, there is no binding agreement.But, why would you not want your own representation? Seller pays the commission. Listing Agent will be negotiating on his/her behalf. Why would you not want another agent looking out for your best interests? If the agent that has (had) been showing you property is not impressing you, perhaps you should speak with another of the agents in town you do know.
9:24 sounds like the typical agent. I LOVE this line in particular, "Seller pays the commission."
Hey dumbass, guess who pays the seller??!!
I bought and sold houses directly with owners and directly with sellers. Piece of cake. Do some homework - find a good, reliable escrow company and pay them a couple of grand to handle the paperwork and save yourself thousands!
5:36 -
If you have experience buying and selling then you may get a better price using the listing agent. Using the listing agent gives you an advantage if there are other people interested in the property. I have made at least three successful transactions this way (one residential, two income), in each case I know I got a better deal and beat out other bidders. However, you need to know exactly what the realtor's relationship is with the seller. If the seller's leaving town a realtor may lean in your favor because it could lead to future business with you. (I still have relationships with all three realtors, and have done another transaction with one). I stress you need to know what you're doing and have the confidence. (pick the right inspector, make sure escrow/title is good and gives you a good deal, etc). Don't be afraid to be direct with the listing agent with your intention to save money by using him/her. GOOD LUCK.
Please do spare us the standard burp Anon 9:24.
Ditto 10:37: A buyer ALWAYS pays the seller who pays the agents. The buyer is the one who ultimately pays the entire cost of the real estate transaction.
At worst, one can hire a competent real estate lawyer to review deal documents for a total of a few thousand dollars at most and bypass the 2.5% buyer agent commission, especially if you do your homework and work with a competent inspector and escrow/title company -- who do all the real work of the transaction.
On a 3 million dollar home, that's a saving of 75K, which is two year's worth of property taxes. In an increasingly buyer's market, the role of going with the listing agent or the listing brokerage is vastly overblown. Sellers are going to get hungrier and hungrier over time and reasonable deals which drives down the price for the buyer will likely be considered more and more -- a win for the seller and a win for the unattached buyer.
The seller's agent has a fiduciary responsibility to present ALL offers to the seller, including ones that don't have a representing agent and thus NO agent commission needs to be paid to the buyer's agent. In the days of multiple offers, this was an issue for buyers. Commissions staying within a brokerage drove internal and back pocket deals without exposing the property to the wider market. In multiple offer situations, having the listing brokerage involved may well have helped the buyer.
With homes on the market for months, and inventory starting to get stratospheric, this is less and less of an issue.
The seller's commission can be negotiated out of the sale price: quite simply, if it does not have to be paid, it is one less cost to the seller and the seller should drop the price correspondingly.
If you find any issues with this, the DRE is easy to reach:
http://www.dre.ca.gov/cons_complaint.html
In a market which is dropping, not using an agent will protect some of your down-side risk: transaction costs to buy a home amounts to about 7% of the cost of the home, about 5% is currently paid to the agents (this is also completely negotiable). The day a new homeowner closes escrow, the home purchased would sell for about a 7% loss, all borne by the buyer. In a dropping market, it can get a LOT worse. We are likely to drop 25%+ locally (perhaps much more) -- more on that to come.
In a rising tide, all ships float -- and everyone is happy! In a receding tide, buyer's get stuck with a grounded ship!
The 6 Percent Solution: Skip Real Estate Agents
http://www.nytimes.com/2005/09/17/business/17realtor.ready.html
Also:
www.redfin.com - does a direct 2/3 rebate of commission if you want to use a full service agent.
Excellent advice. Thank you.
Re the farmhouse:
"the layout problem is that one, long, giant living space into which you need to put your casual & formal dining plus all your living area. Even if that room is the length of a basketball court (kinda), it's going to shrink when you chop it up with furniture and try to give it several functions"
I loved the whole concept of the house but the problem above was a deal breaker for me. The kitchen was great and I loved the exterior. Another more minor problem was the size of the laundry room. If a similar design with more defined spaces could be executed, I suspect it would have a lot of interested people. I would be one of them.
5:36p
You are free to go direct, to switch agents etc. And frankly with a slow market, the internet, and a smallish geographic like 90266 it is very easy to get to know the market and find a home to buy without an agent showing. And as others have said the transactions are very easy. And frankly finding an inspector etc that is good and unbiased on your own is probably safer than having a agent who is conflicted as they have commisions riding on a successful close.
That said I have used great agents to help me sell and buy - but I dont structure (and you dont need to) with the normal commission structure (or even insist they kick in for points, credit on closing etc - great agents will - especially in this market)
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