Those crazy real estate professionals

[Alan]

$850k? How did she afford to live there for even a few years? I am seriously in the wrong industry. I should have just gone into real estate sales instead of studyinging engineering in college.

[kpom]

It's amazing, isn't it? I have a stable, good-paying job, and I wouldn't borrow half that amount of money.

I don't know if a downpayment was involved, but to borrow $850K conservatively (i.e. with the expectation of having to pay the loan back rather than believing that you can refinance forever) would imply an income of around $250K/yr.

[thelongwait]

wow, this is like the VP of Sales & Marketing decides to unload all of her company stocks.

[Matthew]

Something tells me that she is selling because her Subprime/Alt-A/Option ARM is about to reset.

She is trying to sell it for 999,950.

"Selling for over a million would take a lot more work".

[kpom]

"Selling for over a million would take a lot more work"

That 50 bucks sure makes a big difference, doesn't it - although from what little know I know about RE marketing, she's probably right.

In a comment on her "the-flip-side-of-the-sub-prime-story", A. indicated that she did, in fact, put no money down on her house (she was conserving her cash to get established in the RE business in Seattle).

So, WAMU really did lend her $850,000.

[perfectfire]

[mike2]

Something doesn't seem right here. If she had a subprime loan, the interest rate probably started in the 7.5% range. Just the interest payments on $850K would have been more than the gross gain on sale after 2.5 years, and way more than the net. Throw in taxes, maintenence and insurance and any remodeling she did and it looks like she's walking away with less than if she'd rented a comparable place for the past 2.5 years and saved the difference. That's assuming she gets her asking price.

...yet she's been ripping on The Tim for doing that.

Back of the envelope calculation shows these costs over 2.5 yrs...

Interest: 159,000 ($850K at 7.5%)
Taxes: 15,000 (based on similar price homes for sale)
Maintenence/upgrades: 21,000 (based on 1% of sale price/year)
Buying costs: 25,000 (assuming 3% total)
Selling costs: 30,000 (same 3%)

That comes out to about $250K to secure a capital gain of $150K...

Maybe since she's a realtor she can write off the house as a work related expense, since after all, they need to own a home to pull off the "successful realtor" look.

[The Tim]

[kpom]

If we making corrections to Mike A.'s analysis, you do need to add as a benefit the imputed rent on the house - A. did get to live there, after all.

As a WAG, if the market rent was $2,500 (probably high), that would be a benefit of $75K over 2.5 years. And as we are being forever reminded by RE Professionals, interest expenses are deductible, so that confers a further benefit - somebody else knowledgeable can compute that (50K?). So, she is probably making a small gain if she sells at the offer price.

That was one thing that struck me reading the "real estate as the road to riches" PR - at the interest rates subprime loans were going for, to make money a house didn't just have to appreciate - it had to appreciate by a lot to offset the interest and other expenses.

[mike2]

Yea, there a few thing left out that would have an effect on the rent/buy calc, like insurance, income tax deduction and comparable rent - however, when I look at the $100K cost overrun of buying vs renting, the question becomes how much of that $100K did she save in income taxes, and how much would she have spent on rent meanwhile.

Then it gets even more subjective - from her explanation of why she's selling, this house didn't really meet her needs. Saying that she "needed" a comparable place to rent probably isn't true. Also, who knows what a house like that would rent for. I'd have to think it's on the low end for the square footage because most people that want a house that big (I remember her describing it as large) in that location want usable space that's well laid out, modern and/or tastefully renovated- which she says hers is not.

With predicted 18% appreciation over the period, I agree that a straight up rent/buy calc could be a few $ on the "buy" side, but for someone making the ~$210K/yr they'd need to be making to both afford the place AND still qualify for interest deductability on their AGI, the difference is peanuts.

BTW, I included any excise tax in the 3% transaction costs, which I know is a real low estimate but I figured that an agent could potentially save comissions on both sides of the transaction.

[rose-colored-coolaid]

[PublicEnemy#1]

According to King County, she paid $4,347, $4,236 and $3,965 in 2007, 2006, and 2005, respectively, in property taxes. She is going to be paying $4,804 in 2008. That's $400 each and every month for the privilege of living in Kirkland?????

What's interesting is that she claims a much higher square footage than the county shows.

The county shows her above ground sq. footage at 2,410, yet she claims somewhere in the 3,200 range, which I have to assume means she is counting the basement as part of the square footage for the home (Being a 1921 bungalow, it's not likely to be a split level walkout). I hate it when agents claim old basements as square footage. Finished or not, I just don't see how they qualify as true living space for a variety of reasons, but that's just my opinion.

They do that ALL the time in PDX and it can make house hunting VERY aggravating.

Interestingly enough, her Zestimate has dropped about $200K in the last three months.

But Kirkland is BULLET PROOF I tell ya!

[Matthew]

Do you have the address or MLS #?

[ellsworth]

Apparently it's not yet listed.

Here is the old listing info:

KC Parcel #: 1245003770
Address: 127 10TH AVE, Kirkland, WA 98033
Old MLS#: 25046771
Sold (09/08/05) $850,000 after 118 CDOM with no price changes.


DellaLoggia, Ardell (40371)
Brio Realty Inc (5654)
12207 NE 8TH ST Bellevue WA 98005 425-990-3333

[deejayoh]