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.
"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).
Gladly working 24/7 for the opportunity to prove to them that a woman could make it after divorce, and not just "get by" but have a nice home.
But Ardell, if you sell your house how will your daughters know that a woman can "make it" after and divorce and get a huge mortgage? I once knew a mother that got rid of her subprime, stated-income mortgage and immediately her daughters lost all of their self-esteem as women, got fired from their high-powered corporate jobs, and got pregnant by some drifter. Don't do it! For your daughters' sake, please!
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.
Other than to point out that mike2 above left out the 1.78% excise tax on the sale, which (if she gets her asking price) would come to another $17,800, I'm not touching this A. thing with a 10-foot pole.
the savvy Seattle buyers are out there in neighborhoods and suburbs right now trying to scoop up some deals before others realize that the market isn't as bad as they thought! The truth is that Seattle has a booming real estate market in 2008 – it is just a very different market than we have seen in recent years. Seattle sellers, agents, and buyers need to adapt and stop looking to the media for "expert information" because the media seems to be gripping more of a doom and gloom Seattle bubble attitude. Instead, ask someone out there who is actually listing and selling houses in 2008!
...
More and more buyers will be out as warmer days set in and with this will come some competition. Sellers should have their full service agents price their home competitively. They should pay the extra money and have an accredited Stager help them get their home ready for the market if their Realtor suggests it.
...
The window of primo opportunity is getting smaller as more buyers realize how enticing Seattle real estate is right now!
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.
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.
the savvy Seattle buyers are out there in neighborhoods and suburbs right now trying to scoop up some deals before others realize that the market isn't as bad as they thought!
Warren Buffet made his millions doing exactly the same thing. Find a market that is taking, wait for a dead-cat bounce, and buy-buy-buy.
On the Ardell thing, it should be sobering that a house could see $50k appreciation a year and still not turn a profit. And that's assuming you put no money/work into it.
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.
Not sure yet, but I might do a post on "Can Zillow and Craig's List Sell a House"? LOL! I'll probably put it in the MLS at the same time, but with a BAF more like what I myself charge, than the "have to" 3%. Maybe I'll try one of those $1.00 offerings where the BA gets paid by his own client. Many ways to play around with your own home, that you can't for clients, like blogging it all the way through.
It's going to be interesting...
wait - she doesn't think that 3% buyers agent fee is worth it? Happy to be paid it, just not to pay it when it's her turn. seems a bit, um, hypocritical
"wait - she doesn't think that 3% buyers agent fee is worth it? Happy to be paid it, just not to pay it when it's her turn. seems a bit, um, hypocritical"
I don't charge 3% on a million dollar puchase or sale transaction. I don't charge 3% on most transactions. If you read what you quote me as saying, you will see your error. Most often I charge a flat fee. I said I would offer what I would generally charge. Probably a bit more than I charge. No hypocrisy.
Yeah I have to stick up for Ardell on that one. If you've read some of her previous posts you'd see that she's definitely not the kind of agent that just takes the 3%. She's been experimenting with a bunch of different fee structures outside of the "standard" flat percentage.
Not that I would personally use her services either way, but I definitely don't see the hypocrisy here.
"wait - she doesn't think that 3% buyers agent fee is worth it? Happy to be paid it, just not to pay it when it's her turn. seems a bit, um, hypocritical"
I don't charge 3% on a million dollar puchase or sale transaction. I don't charge 3% on most transactions. If you read what you quote me as saying, you will see your error. Most often I charge a flat fee. I said I would offer what I would generally charge. Probably a bit more than I charge. No hypocrisy.
oh, so you do read the comments!
Sorry, I hadn't read any prior posts from you how you view agent fees. I shouldn't have assumed you held to the 6% rule, and I stand corrected.
I'm with deejayoh that it seems a little creepy tracking something that should be a private transaction. But I guess it was her choice to put all the info out there.
I just hope the sale goes smoothly for her and she gets close to asking in a quick transaction. Not that I like (or dislike) Ardell, but I doubt some of our fellow bubbleheads could restrain themselves from taunting.
I wasn't registered to see and respond to your forums, but someone sent me the link to the discussion about me and my house, so I decided to dip my toe in.
The conversation is going very well from what I can see. There was another error regarding the property being on market with no price changes when I purchased it back in 2005. It was reduced from the $899,900 original asking price down to $850,000 when I purchased it. I also walked off with a 4% Buyer Agent Fee and the seller paid my closing costs, so I had NO cash outlay and left with $34,000 at time of purchase.
I'm surprised no one is calculating the tax writeoff of the Interest and RE taxes when calculating my "profit". When all is said and done, which means after it closes, if in fact I do sell it, I'll do a final wrap up post and answer any questions people may have. For now I'm trying to keep it a Reality TV type experience on the steps of selling your home, and not a conversation about the financial aspects. But I have no objection to your doing that on "your turf" and I'll stay tuned.
I'm surprised no one has asked where I'm going Will I buy? Will I rent? I can tell you I won't know until it closes, or at least until it is in escrow and I'm not 100% sure it will sell at all.
I just assumed that you would be buying in Redmond, probably 2 miles from the MS campus. I think that all real estate professionals will withdraw to the safe confines of the Walls of Microsoft, to make one final stand against the evil forces of Emperor Subprime and his dark bubble minions.
A force field will be erected 2 miles around microsoft, where Crystal will lead her army of pink ponies to repel the onslaught of bubble minions. Stay tuned as the battle is predicted to last several years.
How could we know how much you're writing off? Self employed people generally have a lot of deductions. One friend in particular runs a cash business and in order to buy a home merely claimed enough income to qualify for a loan - which at the time not much was needed to get a good rate.
I'm surprised no one has asked where I'm going Will I buy? Will I rent? I can tell you I won't know until it closes, or at least until it is in escrow and I'm not 100% sure it will sell at all.
You have already said on RCG comments that you are thinking about purchasing closer to Microsoft.
What I said was "I'm keeping my eye out for a fixer as close to Microsoft as possible. That would be my next two year choice from a financial standpoint. From a lifestyle standpoint, it would be a similar home at a similar price or less in Juanita, or Finn Hill or Forbes Creek, playing the Annexation and Totem Lake Mall card."
I'm keeping my eye on a lot of things. What I actually do will be very telling... Will I choose using emotional criteria or financial criteria?
All of it. But my point is that some here stack the deck against loss in real estate as much as the Realtors stack it to the opposite extreme. Most times SB and Realtors are polarized opposites and equally incorrect.
If you're going to run hypothetical scenarios, why not include the whole payment as a writeoff and the RE taxes too. You calculated my income, why not calculate the write-off. Seems like a conspicuous error stacked to make a worse case scenario, just like Realtors miss things to create best case scenario.
Frankly, I think you are making a good financial decision trying to sell this year rather than next. I think Seattle and the Eastside are in for a rude awakening this year regarding home prices and stubborn sellers will be watching equity vanish if they refuse to lower their prices.
The reality is, banks aren't willing to lend money to people who want homes for more than 3x income anymore without a substantial down payment. That period of crazy lending is now in the history books, only to be resurrected in another 30 years or so, once everyone has forgotten the lessons.
I think your current potential asking price is too high, if you truly want to sell, but it's your decision and I will be curious to see how it pans out.
It's like your home in Kirkland. $850K for a bungalow in Kirkland??? I grew up in Kirkland, graduated from Lake Washington High School, and cannot seriously see what makes a 1921 bungalow with a view of Mt. Rainier and easy walking distance to Moss Bay worth anywhere CLOSE to that price.
If you can profit from your purchase a few years ago, more power to you.
Finding a bigger fool is the key thing to do. When we sold down south, (01/2007), I was petrified that the buyers would back out at the last minute because I thought they were crazy to pay what we were asking (and got).
Relatives thought I was nuts for selling when I did.
I thought the buyers (80/20, zero down) were crazy for taking on that monthly payment. Seeing how the market has changed in my old neighborhood, I am thrilled I had to sense/luck to bail when we did.
I hope you don't get caught holding the bag on this one.
I found your desire to be close to MS interesting. As a MS employee, I can't afford the houses around here. Most of the people I know earn in the same ballpark as me (within 30%). There is a house at the corner of 50th and 148th that is asking $800k. People with double incomes would be stretching to live there (although they are advertising is as subdividable with a rentable basement -- so that does lower the barrier to entry). But I think most people I know would love a hyper-short commute so it is a desireable location.
So you have this high employee dense area where the workers want to live. That makes the land more valuable. The fact that it is more valuable makes people who do not work in that area want to own land there. That makes the land even more valuable.
But based on current prices and the incomes of MS employees, I could imagine a scenario where most of the land around MS becoming occupied by people who do not work here. The result? Lots of traffic leaving the area and lots of traffic coming into the area in the mornings and evenings. Everyone loses.
It's not a bugalow. It maintained the bungalow frontage. Behind the "bungalow" is a three story addition making the total about 3,300 sf of living space plus the oversized attached garage. They'll be pictures of it soon enough, but I see your point. No, a bungalow of it's original size, about 900 sf, would not be "worth it". But it would be worth at least $700,000 and likely $750,000 as a teardown. The house should be worth $60 a square foot I think plus the lot value.
Don't ever buy on or siding to a busy road like 148th. It's a heartbreaker if you try to sell on a busy road in a bad market. You want to slash your wrists.
Comments
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.
She is trying to sell it for 999,950.
"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.
...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.
I was amused by this find today though: Seattle Real Estate: Primo buying window getting smaller... I love it.
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.
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.
Warren Buffet made his millions doing exactly the same thing. Find a market that is taking, wait for a dead-cat bounce, and buy-buy-buy.
On the Ardell thing, it should be sobering that a house could see $50k appreciation a year and still not turn a profit. And that's assuming you put no money/work into it.
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!
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
Although I did find this comment in her post to be insightful:
wait - she doesn't think that 3% buyers agent fee is worth it? Happy to be paid it, just not to pay it when it's her turn. seems a bit, um, hypocritical
I don't charge 3% on a million dollar puchase or sale transaction. I don't charge 3% on most transactions. If you read what you quote me as saying, you will see your error. Most often I charge a flat fee. I said I would offer what I would generally charge. Probably a bit more than I charge. No hypocrisy.
Not that I would personally use her services either way, but I definitely don't see the hypocrisy here.
oh, so you do read the comments!
Sorry, I hadn't read any prior posts from you how you view agent fees. I shouldn't have assumed you held to the 6% rule, and I stand corrected.
I just hope the sale goes smoothly for her and she gets close to asking in a quick transaction. Not that I like (or dislike) Ardell, but I doubt some of our fellow bubbleheads could restrain themselves from taunting.
The conversation is going very well from what I can see. There was another error regarding the property being on market with no price changes when I purchased it back in 2005. It was reduced from the $899,900 original asking price down to $850,000 when I purchased it. I also walked off with a 4% Buyer Agent Fee and the seller paid my closing costs, so I had NO cash outlay and left with $34,000 at time of purchase.
I'm surprised no one is calculating the tax writeoff of the Interest and RE taxes when calculating my "profit". When all is said and done, which means after it closes, if in fact I do sell it, I'll do a final wrap up post and answer any questions people may have. For now I'm trying to keep it a Reality TV type experience on the steps of selling your home, and not a conversation about the financial aspects. But I have no objection to your doing that on "your turf" and I'll stay tuned.
I'm surprised no one has asked where I'm going
I just assumed that you would be buying in Redmond, probably 2 miles from the MS campus. I think that all real estate professionals will withdraw to the safe confines of the Walls of Microsoft, to make one final stand against the evil forces of Emperor Subprime and his dark bubble minions.
A force field will be erected 2 miles around microsoft, where Crystal will lead her army of pink ponies to repel the onslaught of bubble minions. Stay tuned as the battle is predicted to last several years.
You have already said on RCG comments that you are thinking about purchasing closer to Microsoft.
What I said was "I'm keeping my eye out for a fixer as close to Microsoft as possible. That would be my next two year choice from a financial standpoint. From a lifestyle standpoint, it would be a similar home at a similar price or less in Juanita, or Finn Hill or Forbes Creek, playing the Annexation and Totem Lake Mall card."
I'm keeping my eye on a lot of things. What I actually do will be very telling... Will I choose using emotional criteria or financial criteria?
All of it. But my point is that some here stack the deck against loss in real estate as much as the Realtors stack it to the opposite extreme. Most times SB and Realtors are polarized opposites and equally incorrect.
If you're going to run hypothetical scenarios, why not include the whole payment as a writeoff and the RE taxes too. You calculated my income, why not calculate the write-off. Seems like a conspicuous error stacked to make a worse case scenario, just like Realtors miss things to create best case scenario.
At least make it credible guys.
Frankly, I think you are making a good financial decision trying to sell this year rather than next. I think Seattle and the Eastside are in for a rude awakening this year regarding home prices and stubborn sellers will be watching equity vanish if they refuse to lower their prices.
The reality is, banks aren't willing to lend money to people who want homes for more than 3x income anymore without a substantial down payment. That period of crazy lending is now in the history books, only to be resurrected in another 30 years or so, once everyone has forgotten the lessons.
I think your current potential asking price is too high, if you truly want to sell, but it's your decision and I will be curious to see how it pans out.
It's like your home in Kirkland. $850K for a bungalow in Kirkland??? I grew up in Kirkland, graduated from Lake Washington High School, and cannot seriously see what makes a 1921 bungalow with a view of Mt. Rainier and easy walking distance to Moss Bay worth anywhere CLOSE to that price.
If you can profit from your purchase a few years ago, more power to you.
Finding a bigger fool is the key thing to do. When we sold down south, (01/2007), I was petrified that the buyers would back out at the last minute because I thought they were crazy to pay what we were asking (and got).
Relatives thought I was nuts for selling when I did.
I thought the buyers (80/20, zero down) were crazy for taking on that monthly payment. Seeing how the market has changed in my old neighborhood, I am thrilled I had to sense/luck to bail when we did.
I hope you don't get caught holding the bag on this one.
I found your desire to be close to MS interesting. As a MS employee, I can't afford the houses around here. Most of the people I know earn in the same ballpark as me (within 30%). There is a house at the corner of 50th and 148th that is asking $800k. People with double incomes would be stretching to live there (although they are advertising is as subdividable with a rentable basement -- so that does lower the barrier to entry). But I think most people I know would love a hyper-short commute so it is a desireable location.
So you have this high employee dense area where the workers want to live. That makes the land more valuable. The fact that it is more valuable makes people who do not work in that area want to own land there. That makes the land even more valuable.
But based on current prices and the incomes of MS employees, I could imagine a scenario where most of the land around MS becoming occupied by people who do not work here. The result? Lots of traffic leaving the area and lots of traffic coming into the area in the mornings and evenings. Everyone loses.
It's not a bugalow. It maintained the bungalow frontage. Behind the "bungalow" is a three story addition making the total about 3,300 sf of living space plus the oversized attached garage. They'll be pictures of it soon enough, but I see your point. No, a bungalow of it's original size, about 900 sf, would not be "worth it". But it would be worth at least $700,000 and likely $750,000 as a teardown. The house should be worth $60 a square foot I think plus the lot value.
Don't ever buy on or siding to a busy road like 148th. It's a heartbreaker if you try to sell on a busy road in a bad market. You want to slash your wrists.
KMDA