I went to an open house yesterday. I haven’t been going to many open houses lately, either because I’ve been working the weekends or because I’ve had better things to do with my time. There haven’t been that many homes that I might be interested in anyway. But there was one yesterday for a house that hit MLS last week. It was right around the corner and it seemed like something I might be interested in, so I went.
43 Strong Ave is a small, 3 bedroom, 1 story cottage, circa 1930 if the MLS listing is to be believed. The listing says ranch, but it’s more of an unconverted bungalow. According to the usual sources, the current owners purchased the house back in September of 2005 for $378,000. It looks like it was an estate sale, so it’s not unreasonable to assume both that they got somewhat of a deal and that house may have been a bit of a fixer-upper. It sites on a smallish plot of land, 62′ x 111′, has no garage and a gravel driveway. Taxes are under $6,000 year, including village tax.
I’d driven by the place a couple times, so I knew that it was small place, but it looked even smaller inside. There was a moderate-sized kitchen, a small dining room and a cramped, but usable living room. The master bedroom was of a decent size, but the second bedroom was small and the third was little more than an over-sized walk-in closet. Overall, there wasn’t much more total space in the whole house than in my two bedroom apartment. The basement seemed dry, although there was only about six feet of space from the floor to the joists, ruling out using it for an exercise area.
There had obviously been some renovations. The kitchen was all new with light wood cabinetry and gray Corian or something similar for the countertops. The bathroom has been re-tiled and the whole house had nice, new windows. There were still some blemishes apparent, but in the whole the place was bright, airy and livable.
So where does the clueless part come in? It’s the price, of course. For this tiny, three bed cottage on a slip of land with no garage and a gravel driveway, the owners were asking $499,000. For the math challenged, that’s just over $120,000 more than they paid for the place almost exactly two years ago. It’s also $70,000 more than a house two doors over, a four bed, 1.5 bath colonial, sold for two months ago.
I keep wondering what’s going on here. There are a few recent comps that show how silly this price is. There are bigger, better homes that have been languishing on the MLS for months at similar or lower prices. What gives?
I really wanted to talk to the listing agent and ask her what was going on. Did she seriously think that this was the right price for this house or did the owner insist on this price over her objections? But the listing agent wasn’t there. The open house was being run by a young woman who was obviously new to the real estate biz. She didn’t know that much about the house. She was confused about which listings on the block belonged to her agency and was even unable to find the house’s washer and drier. I guess that in itself kind of answers my question.
Based on the facts that you provided, this house sounds like a capital gains flip. They buy the house, renovate it, and then sit on it for 2 years so they do not have to pay the federal capital gains tax of 15%.
A house in my town is in a similar situation. The current sellers bought it in 2005 for $675,000, renovated it really nicely, and are now asking $1.1 million. The house has a great view of the Manhattan skyline and has really high end materials, but it is overpriced. No garage, no useable back yard (which is taken up by the in ground swimming pool), no master bathroom or walk in closets, and the family room was not that large.
That was my thought too, Donald. The fact that they’re selling in September, almost exactly two years from when they bought the place, lends credence to that theory. According to Property Shark, the previous sale date was 9/07/2005.
I guess they’re stuck, though. There’s no way they’ll get anywhere near their price now and if they try to wait it out, they’ll get even less. The house has been somewhat renovated, but there’s still work to be done. My guess, based on MLS listings and local comps, is that they could maybe move the house if they listed it at $349,000. That’s a about a $50K loss for them, not counting the cost of the renovations.
Your flip example is exactly on point. Check out my earlier post on 24 Mason Ave, which is right around the corner from this one. That one is even worse for the flipper, since the home has been sitting empty for ten months waiting for a buyer. I figure it must be costing him at least $3,000 every month it sits unsold.
I hope the owners of 43 Strong like their house. They’re going to be living in it for a long time.
I think it is unlikely these sellers wil lower their prices anytime soon. Next year, start looking at the rental listings and you will see some familiar houses.