Wednesday, July 14, 2010
Raising Prices In A Declining Market
The above house in Hingham, Massachusetts recently was put up for sale.
I got a nice laugh out of that MLS *alert*.
You see, 3 years ago, after languishing unsold for 2+ years, my wife and I gave that suffering speculator his FIRST bid. We bid 700k when it was listed at around 815k. He scoffed at us, countering at 810k.
8 months later, he did in fact unload the house at $767,500 - though I heard from the broker that the sale price included a *large incentive*. In other words, he kicked back a chunk of change to the buyer so they could manipulate the *% down* on their mortgage application. Thus the house probably sold for, net, a number a lot closer to our 700k bid.
Now I know this house inside and out. It's a McMansion not only in a *bad neighborhood*, but also RIGHT ON THE TRAIN TRACKS. The train literally zooms by, a few hundred feet away, at something like 80 mph (I estimate). Furthermore, though the house is large, probably 5,000 square feet including the basement and usable attic, it still only has 3 dedicated bedrooms. Another major demerit for this place is that it has *propane heat* - which is only a half a notch better than budget-crippling electric heat. Who in their right mind wants to heat a 5,000 square foot house with propane?
Don't get me wrong, the house has some nice, modern attributes. Otherwise, we'd never have bid 700k for the place.
So two years after buying the abode at say, roughly, 725k, the current owners want out. Guess what, they listed it at a counter-logical $879,000!!!
The only things they could have possible done since we vetted the house are: finish the almost-finished attic, finish the almost-finished basement, and carpet the master bedroom. And there's no way that could have cost more than 50 grand altogether - never mind that it, like all home improvements, doesn't add a 100% ROI to the value of the house. Where exactly do they get off thinking that a house, ON THE TRAIN TRACKS, that only had two bids on over the course of 3 years....HAS GONE UP IN VALUE by 100 grand between 2007-2009 when the rest of the national housing market has been plummeting?
I say good luck to them!
Recall that we bid on two different homes in Hingham three years ago. Both of them sold about a year after our insulting lowball bids were rebuffed. And BOTH OF THEM hit the open market again in the past few months. The other one was about to be sold but then the (new) owner decided to rent it out.
Why, if I may ask, do people buy homes and (try to) sell them only two years later?
I presume the explanation is usually *job-related*; though the rental above came about because of a *divorce*; and I've read that *medical issues* are also a leading factor for distressed real estate situations.
See also - Real Estate Autopsy.