Jan
23
A Lesson In How Not to Sell A Home In Issaquah Highlands
Written by: rebecca and filed Under Blog, Buyers, Issaquah Highlands, Real Estate, Sellers |
In a previous post on the appreciation in real estate prices that Issaquah Highlands has seen comparing 2006 to 2007, I showed some data on the resale’s that had occurred in Issaquah Highlands between 2006 and 2007. Shaq, one of my readers, inquired about specifically about one home that had shown a anemic 1% increase in price from the time it was first purchased in 2006. So I decided to dig in a little bit to investigate why this house is such an outlier.
House 29 indeed has had an interesting history.
The home was first on market in 2005 as new construction and was originally listed in the high $600,000 getting moved up to $704,950 where it generated an offer in May of 2006. The house finally closed in November 2006 with a sales price of $713k,000. The increase in price probably was related to upgrades put into the home as well as the increase developers were making in prices at the time to account for market demand.
The original buyer then tried to sell the home only four (yes you read that right; FOUR) months later in March of 2007 hitting the market at $800,000. In my opinion, the listing was overpriced and underwent a series of price reductions:
- first reduction - 04/12/2007 - $775,000
- second reduction - 05/21/2007 - $769,950
- third reduction - 06/04/2007 - $759,950
- fourth reduction - 06/20/2007 - $755,000
- fifth reduction - 08/13/2007 - $739,000
The home finally generated an offer at the $739,000 asking price. The home closed on October 1, 2007 for $722,000 - still an increase in price over the original sales price a year earlier.
This quick turnaround does not appear to be the result of someone trying to “flip” but rather a less than timely relocation as the property was originally listed with the owners of record on the deed, but that changed to a relocation firm shortly before the house sold. In my opinion the 7 month market time was in large part due to an overly optimistic original listing price. I would suspect that if the home were originally listed closer to $760,000, it would have sold sooner and closer to asking price than it did. Stair stepping down in price is not the way to get your house sold. When you do that, you end up chasing the market.
While this example is interesting because it shows us what happens in value over the course of a year or two (it did increase) obviously in this instance the increase was not enough to cover the expenses. That being said though - I don’t know many people who end up having to list their home for sale four months after moving in. My guess is the employee was “bought out” of his home by the relocation company and the relocation company / new employer was willing to take the hit. They will even be able to write it off.
I do think real estate is a great investment - but I believe in the buy and hold method vs flipping.
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Rebecca Kuno
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Rebecca,
Do you know that real estate on an average, for the past *100* years, just managed to beat inflation? As per the research done by Robert Shiller, inflation-adjusted US home prices increased just 0.4%/yr from 1840-2004 and 0.7%/yr from 1940-2004. Inflation adjusted prices in the last 3 years increased more than 50%!!! Now that’s a bubble.
The best form of investment for the last 100 years or so has been the stock market which has given on an average 5-6%, returns adjusted for inflation.
In the real estate mania that happened between 2004-2008, people forgot that a house is a place to *live in* - not to flip or to be used as an ATM machine.
Buying a rental property as an investment is fine as long as you have sufficient money to pay the downpayment and mortgage and you want to diversify out of stocks into a stabler form of investment.
Remember - real estate is a stable form of investment, and you can *never* have a low-risk but high-reward asset. The less riskier the asset, the less the gains and vice versa.
Do not assume that what happened in the last 4 years are going to continue - they cannot; otherwise beggars would be choosers.