Interesting idea
http://bothellcountdown.com/Photos.aspx
I wonder how many drops before it will sell?
And I am curious to see if the floor price he has for the place is something that people will pay in the current climate.
I wonder how many drops before it will sell?
And I am curious to see if the floor price he has for the place is something that people will pay in the current climate.
Comments
I'll say it again I guess...
It's obvious the seller is desperate, so why not wait till he forecloses and buy it at paper value.
He is holding a traditional dutch auction. Things have been sold like this for hundreds of years.
http://en.wikipedia.org/wiki/Dutch_auction
I bet his reserve price is determined by how much rental income he can generate.
Is this really what 499K can buy in Bothell? Wow.
I will be interested to see how low the price goes. I want to ask: What's your motivation? Do you have to sell or are you just testing the market? Maybe I'll ask that and see if he posts it in the FAQ section.
Wrt a foreclosure, I luckily bought the house back in 2004 when prices were lower so the price has a ways to go before I'm underwater. I also don't see myself having any problems making payments for the foreseeable future if necessary.
On the topic of the price and my motivation, in April, homes in Bothell sold for $200/sq. foot. Of course that number includes new construction, much older construction, smaller homes, larger homes, and a host of other factors that may not align with my house, but according to the limited data I have, $499k appears to be within reason. Of course we'll find out soon enough if that's right
Wrt motivation, I'll be using the proceeds to fully fund a software start-up, TwoSpaces.Net. We're not in dire straights so I don't consider myself desperate, but we could definetely put the money to good use.
Thanks again for the comments, let me know if you have any others and I'll do what I can to keep up to speed.
Justin
Frankly, I suspect the only real Puget Sound deals to be found in the next few years will be bank-owned properties. Existing home-owners are just never willing to drop prices substantially enough.
If he wants a "profit", then there certainly must be some kind of floor on his price. I doubt he would be willing to accept a transaction where he has to bring money to the table. Or is this home owned free and clear?
If his floor price is $200k for instance, then it's extremely unlike he will reach that unless some Armageddon event happens.
At his current price he'd be looking at an average appreciation of 12.8% per year, take-home profit (assuming a 3% buyer's commission and excise tax) = $148k
10% per year would bring the price to about $430k, profit of $110k
7% per year ~ $386k, profit $68k
5% per year ~ $360k, profit $43k
2% per year ~ $323k, profit $8k
I'm betting his floor is somewhere between the 7% and 10% figures.
Depends. Essentially nobody factors in any real estate costs except the purchase price when bragging about how profitable it has been. So, from a psychological perspective as long as it's more he's probably happy.
Also have to add-in the increased value for upgrades. Assuming about $50K for improvements (based on the itemized list of what they had done), this house would have a value of about $396K today.
Since the owner bought in Oct/2004 for $299K, I am presuming they will at least break even. Profit will be determined by how much they had to pay for the upgrades (granite, floor, appliances, etc.). Unfortunately, labor/materials during the bubble mania were higher than they are today so they probably overpaid for the upgrades (just like everyone else). I have had many contractors bid work for me for adding new rooms, new roofs, and just about everything else you can think of so I have some experience is estimating upgrade costs.
Bottom line is that this house still needs to be reduced by a minimum of 15% to really be competitive with actual value based on historical long term (i.e. not bubble) appreciation rates (based on "liberal" 4% appreciation rate).
My opening bid would be $340K.....(I use a more conservative 3% rate of appreciation when driving a bargain and it IS a bear market in RE)
I think he is finding out that there is a dominant strategy for buyers: wait. It's a case where the statement "it might be cheaper tomorrow" is definitely true. And since there are tons of other options on the market - the need to strike quickly is limited.
I hope his business plan isn't based on reverse auctions.
Seems to me that a number of sellers are caught in the same trap. Prices fall $11k in a month and the seller drops their price $10k
Huh? If he keeps dropping the price he will DEFINITELY find the clearing rate at some point. Who wouldn't buy the house for $1.
Wouldn't the dominant strategy be to wait until someone else bites and then call the seller with a higher bid? You might raise the price $10k overnight, but if it saves you $50k by waiting for a signal that you aren't the greatest fool, then it's all good.
If someone is willing to go through the trouble of an auction to sell quickly, why not just use a regular auction or even a second price sealed-bid auction and be done with it.