Friday, March 7, 2008

So close...almost there...I know you can do it

The MSM is kinda getting it. Almost.

CNN today has a story about how you can get cheap buys in the $1M+ housing market due to foreclosures. It's as if a member of the NAR wrote this thing, maybe one did, who knows. Here is one of the examples given in Alpharetta, GA, a suburb north of Atlanta.

Price: $1,100,000
Estimated value:* $1,619,000
Last sale price: $1,430,000 (November, 2001)

I looked this up on RealtyTrac and the address is 115 Old Barn Court. It was foreclosed upon on 10/19/2007. So it has been sitting empty for 5 months. During that time the bank has tried to unload it and obviously no sale.

So of course the value is not $1.619M. If that were the value it would sell for $1.619. Or at least it would be for sale for around $1.6M. The fact it is for sale at $1.1M means the value is $1.1M. And that is assuming someone actually pays $1.1M for it. Logically, speaking, if you owned an asset that was worth X, why would you sell it for 70% of X? You wouldn't of course. This is salesman lesson 101: make the mark (oops I mean client) think he's getting a bargain. Look here Mr. Smith this house is worth $1.6M but you can buy it today for only $1.1M. Better hurry and put in an offer before it's scooped up by someone else....which is salesman lesson 102, create a sense of urgency in the buyer's mind.

From I see that there are plenty of others to choose from in the neighborhood

Here are just the ones going to auction in that price range near 115 Old Barn Ct.

- Merriweather Woods, Alpharetta, GA 30022 $1,952,500.00
- W. Addison Dr, Alpharetta, GA 30022 $1,381,250.00
- Cherbury Ln, Alpharetta, GA 30022 $1,190,000.00
- Tramore Pl, Alpharetta, GA 30004 $960,000.00

Lots of auctions coming up on 4/1...yep April Fool's day. And damn it if anyone buys a house at auction on that day, can finish that sentence yourselves.

I have said this before and will say it once again. Sellers never set the value of anything. Buyers always set the value since they are the ones bringing the money. This applies to houses, cars, gold, baseball cards, you name it. And the plain and simple fact is that right now nobody in their right mind will plunk down $1M for a house.

And hold up a minute, why is this house even in foreclosure. Haven't we been told over and over that this is a 'subprime' issue. I'm pretty sure someone who bought a house in 2001 for $1.43M didn't get a subprime loan to do so.

The reason is of course that this whole thing has never been about subprime. It has been about too much borrowing. The owners of this house got in over their heads just like everyone else. Just because a bank will lend you $1.4M to buy a house doesn't mean you can afford a $1.4M house. or maybe in 2001 they could afford it. But then there is property tax. And maintenance on a 6500 sq ft house. And the Alpharetta wife who needed a new SL500 to drive around in. And of course, it had to be no older than 2 model years and best be having the $4K custom wheels And the country club membership, which goes without saying. And the neighbors went to Fiji for 2 weeks, so they had to go for 3 weeks, 1st class of course. And Jr. turned 16 so he needed a brand new $70K Range Rover since Billy down the road got a $65K Range Rover last month and hell, you'll be damned if your kid's gonna be shown up. And hey housing never goes down so we'll just borrow against the house and pay it back when the house is worth $3M.

How's all that working out for you?

Oh well.

No comments: