Today we have clear evidence that Arcadia is not immune from the market forces and that the flip-happy mentality that’s been free flowing for years is coming to a painful end. It’s Valentine’s Day, but there’s no love for this seller. Last month I profiled a McMansion that was a failed flip. Things haven’t gotten much better as the asking price has been reduced twice in the last two weeks.
This specuvestor paid $1.25MM for this in October 2006. After holding it for about a year, they realize there’s no money to be made and put the house back on the market. This is what has happened since November of 2007.
As I documented on the original post, these folks bought with 100% financing ($1MM 1st loan and $250k on the 2nd loan). The 2nd mortgage lender will lose almost all their $250,000 (there’s $160 left) after 6% commission and fees. See why there’s no more secondary mortgage market? It’s been completely wiped out.
The primary bag holder will still get their $1MM back if they can sell for this price. The sellers are desperate as they are now offering to “help pay for buyer’s closing costs with an acceptable offer, if escrow is closed on or before March 24, 2008.”
What is an acceptable offer? It’s been on the market for 105 days with a total of three price reductions. I say the market has already spoken and an “acceptable offer” is much, much lower than $1,064,000.
The current asking price will put them at a total loss of $186,000 or 15% off the 2006 purchase price over just 16 months. I don’t think they love this house anymore.
This property almost doubled in price in just 5 years during the boom. Does anyone else see anything wrong with that? What will things be like in another 16 months from now in summer of 2009? Another 15% off today’s asking price? 20% off? 30%+ off?
Only time will tell and buyers have all the time in the world to decide.