Sunday, August 15, 2010
Flouting Flipping Fundamentals
754 CHERRY, Long Beach, CA 90813
Asking Price: $384,900
Sq. Ft.: 1,400
$/Sq. Ft.: $275
Lot Size: 6,750 Sq. Ft.
Year Built: 1920
On Redfin: 31 days
Down Payment: $15,400 FHA
Income Requirement: $105,600
Monthly Nut: $2,400
Description: WOW AGENTS SHOW YOUR BUYERS THIS REMODELED HOME. KITCHEN HAS NEW MAPLE CABINETS, NEW GRANITE COUNTER TOPS, NEW TILE FLOOR, NEW MICROWAVE, NEW STOVE, NEW DISHWASHER, NEW GARBAGE DISPOSAL, NEW SINK AND FAUCET, NEW GRANITE ON BREAKFAST BAR, NEW CABINETS AND TILE FLOOR IN PANTRY. NEW TILE IN HUGE SEPARATE DINING ROOM. BATHROOM HAS NEW TUB, NEW TILE IN SHOWER, NEW FLOOR TILE, NEW SINK AND VANITY. BRAND NEW CUSTOM CARPET, NEW CUSTOM PAINT, NEW HEATER, NEW WINDOWS, CROWN MOLDING IN THE GREAT ROOM, NEW FRENCH DOOR IN GREAT ROOM, NEW INTERIOR DOORS. NEW GARAGE DOOR ON THE TWO CAR GARAGE, NEW SPRINKLERS FRONT AND BACK KEEP THE NEW GRASS NICE AND GREEN. NEW GATE AND FENCING, LONG DRIVEWAY FOR MANY CARS AND HUGE CONCRETE AREA FOR RV/BOAT. MANY FRUIT TREES AND LARGE LOT HAS TWO SEPERATE GRASS AREAS FOR THE KIDS AND ENTERTAINNG. HUGE FRONT PORCH ON THIS CRAFTSMAN STYLE HOME. BRING YOUR FHA BUYERS, WE WILL AND CAN WORK WITH THEM.
This illiterate CAPS LOCK fan purchased this craftsman in June for $275,000 and after sprucing it up with some standard flipper fare, slapped it on the market $399,000.
After a month of being laughed at for his ridiculous attempt to extract $125,000 for his "services," he sheepishly lowered the price by $15,000.
And here we sit. On the wrong side of 7th Street. Trying to snatch $110,000 for about $25,000 in upgrades.
I actually think this is a nice little house. But the real question is whether it is priced correctly for this post-Super Summer Selling Season(tm) market. To answer that, we'll need to look at a few fundamentals:
The sold comps are all over the place, and some even justify the asking price. However, he can't escape from 571 Cherry, which is on the good side of 7th and sold for a mere $309,000 just last month. It may not be quite as nice, but I imagine with the $70,000 saved you could make some incredibly nice improvements. Ruling: Overpriced.
This guy is asking $275 per square foot, whereas the average Sold price per square for this neighborhood is about $180. Ruling: Overpriced.
The income requirement, which is calculated at a generous Loan Amount/3.5, is $105,600, whereas the median income in 90813 is -- are you ready for this? -- a whopping $27,375. So for someone living to realistically afford this place, they would need to make FOUR TIMES the local annual income. Ruling: Stunningly overpriced.
On the other hand, here is what it looked like before:
In that context, I can sort of see why he's priced so high. It looks like a piece of fine art compared to its pre-flip state.
But the fundamental goal in flipping is to get in and get out -- quickly. Given that the seasonally slow months in residential real estate are fast approaching, he's taking an awfully big gamble by sticking to what appears to be a woefully optimistic price.
Especially considering these facts:
1) This is a low-income neighborhood, and people making the required $100,000 will be difficult to come by;
2) It's right on top of one of the busiest thoroughfares in Long Beach; and
3) The property is next door to a very big (and very pink) apartment building.
Well, time will tell. But time is also of the essence in the flipping business.
Tick tock, buddy.