Yesterday I came very, very close to making an offer on a house in the tonier part of our neighborhood. The seller, an aged widow who has moved out of state, is offering a vintage 1957 three-bedroom ranch house in an area of $600,000 houses for just$400,000. My agent friend discovered from the seller’s agent that she would entertain not only a low-ball offer but also a contingency offer!
So, we concocted a scheme whereby I would offer $350,000 for that house and then try to get enough from my house that I would walk with $325,000, leaving me with a very small mortgage and enough room to borrow an extra $30,000 for fix-up.
For a brief, shimmering moment, it almost looked doable. Then sanity crept in: “Hey,” said I, “maybe we should run the comps in that subdivision before we present this offer to the guy.”
Oh. Yeah! Maybe so.
In recent memory only three comparable nearby houses have sold. One, a similar model but smack on Seventh Avenue, a hectic main drag, was purchased for $600,000 but just sold, in a short sale, for (hang on to your hats, dear readers) $261,000. Another went on the market FOUR HUNDRED DAYS AGO at $600,000. The seller lowered the price steadily in small increments, but only very recently did the house go under contract-after the price dropped to $450,000. No idea what the contract price actually is, since it has yet to be published.
Under those circumstances, $400,000-or even $350,000 or some compromise between those two prices-doesn’t seem like such a bargain for a fixer-upper, nice neighborhood or not. Add to that the fact that the most basic fix-up would run around $30,000 but still would fall far short of the $60,000 to $100,000 the house needs to bring it up to par with its neighbors.
Meanwhile, here in the low-rent district price drops have been nothing like that. Au contraire.
La Viajera, who bought my last house from me and then defaulted, actually ended up with the bank accepting a short sale of $261,000. She bought the house from me, four years ago, for $211,000, then refinanced to take money out of it as the make-believe value ballooned. That is a growth in value—as in “a house is worth what someone will pay for it”—of more than 5.5% a year. During a period when real estate values across the nation are dropping!
The average actual sale price in my tract is $271,000. My house is slightly above average in quality, with a pool, a new roof, four new skylights, lush xeriscapic landscaping, a watering system, an extra-large lot, new double-paned windows, a deck and a covered patio, renovated kitchen and bathrooms, new flooring throughout, and a custom paint job. The most realistic estimated sale price is about $300,000. I paid $235,000 for it: that’s an increase of a little under 6.5% a year.
It appears to be a matter of location, location, location. Some parts of the city have been very hard-hit by the real estate recession, particularly the brand-new instant “communities” recently tossed up on the far outlying fringes. Closer-in areas are also suffering: at our city councilman’s regular breakfast meeting with constituents today, we learned that 800 houses have been abandoned in our (overall pretty downscale) district alone. But in this immediate neighborhood, to my knowledge we’ve had two actual evictions and repossessions (one of which is presently undergoing a major renovation) and three short sales. That’s a lot for a small area, but it’s far from every second or third house, and in this immediate development, the losers apparently haven’t much affected property values.
Think of that. It pays to be in a centrally located lower-middle-class neighborhood.