When I posted Reduction Ad Nauseum, I really just wanted a read on how the educated real estate populace explains and/or reacts to listings that have suffered not one, not two, but three or more price cuts. Still, one commenter Noe Guy said:
“Interesting observations but I wouldn’t put too much stock in them. First, you picked all TICs. TICs were always more of a speculative area of the market–get financing as a group, hold everything together via legal contract, hope for condo lottery, refinance. Everything about it is more speculative, hence the standard discount of TICs to condos… In this market, that discount should be steeper due to higher risk.
In addition to the more speculative aspect of the TIC market, I’ve always believed that it’s very difficult to accurately price a TIC. It’s not just the property that’s for sale. It’s the property, the actual contract, and the partnership with other owners. Those other two intangibles (from an economic standpoint) make the market less transparent, less liquid, and more difficult to price.
The evidence you’ve sited above clearly makes this case, but keep it in context and look outside of TICs if you want a clearer picture…”
Well, geez, what observations? I just observed 3 properties with 3 or more cuts, and opined that buyers (like me, someday, Obama willing) tend to look at reduced properties as Tijuana specials, as in: $500K now? No, no, I don’t think so. Here’s $300K and a pity hug. My final offer.
But okay, Noe Guy. See, I love a challenge (else why would I be so sure I can buy a house on an English teacher’s salary, eh?). So here you go, 3 more properties, decidedly not TICs, that have come down more thrice or more in their careers on the market.
3645 Market St: Got hold of this one while surfing house porn on Curbed. A pretty swank 3/3.5 condo (look at the sheen off that kitchen!), this one hit the market in Sept. of this year.
Since then:
Sep 04, 2008 $1,295,000
Oct 03, 2008 $1,230,000
Oct 20, 2008 $1,179,000
Nov 03, 2008 $999,000
2. 3039 19th Ave: Merced Manor SFH, this one a 3/2.5, on the market over 80 days. Since its arrival:
Aug 08, 2008 $1,045,000
Sep 06, 2008 $1,014,900
Oct 07, 2008 $984,900
Nov 05, 2008 $955,900
3. Here’s the stalest of the fish: 2 Sumner St., a SOMA 2/1.25 SFH. At over 250 days on the market now, and despite the rather bitchen’ recording studio (pictured below)…
…it’s enjoyed the following decline:
Feb 20, 2008 $1,100,000
Mar 12, 2008 $999,000
Oct 17, 2008 $920,000
Okay, so challenge met. But please note: I mean not in any way to mock the listing agents of these homes, since as we all agree, the market has been unpredictable. But my advice to Realtors, if I can give some, is to price carefully. If you have to come down, then down, then down again, we buyers get sharky– because we smell blood in the water. And as many a three-limbed surfer will tell you, sharks can be pretty difficult to negotiate with.
19th Ave might technically be Merced Manor but it feels a whole lot more like, well, 19th Ave. I couldn’t get the other two links to work. Sight unseen, each property looks like it has a location challenge.
Every home has a magic price that will garner interest from prospective buyers. Buyers tend to look in price brackets. And sellers obviously prefer to skim the fat on those brackets when pricing a property. Pricing is an art, not a science, but there are obviously some general metrics used to derive a final number.
In this market — there is a clear standoff and ultimately the buyers are going to win. There is no positive outlook on the horizon for real estate or the economy as a whole.
I’m far too lazy to do the research, but I’d be willing to bet that the overwhelming majority of the last 100 condos / SFH in prime San Francisco that have gone into and closed escrow in the prior 60 days (are there even an 100?) have been from sellers who have lived in their property for longer than 4-5 years. I wouldn’t even place an offer on a home where the owner is in it less than 3 years as they are going to have unrealistic expectations on what their home is worth. Foreclosures and homeowners / sellers with genuine equity will be the new comps for the market.
The only thing that ultimately matters is the final selling price that goes on record. It’s all a game until two parties exchange checks & keys.
fluj- we were laughing too, at my apartment, as I typed up that blog post. “Merced Manor,” I said. “Er, more like 19th Ave.” Haha. Such delusions…
pretty simple really,
put it on the market; clean, vacant and polished/staged. have lots of advertising and showings and one price reduction if necessary (10-15%). after eight weeks you yank it and change it in some significant way (i.e. paint,roof,floors,baths. kitchens, stairs,W/D’s,more parking, etc in any combo…) and try again.
in other words, do what you can and let the market take care of the rest. if you cannot accept the market’s valuation then you hold on until better times.