Under $900k in the Highlands

March 14, 2008 · SavedbyGrace · Property Profiles

Asking Price	$888,000	:::	Sq-ft	1,751
Purchased Price	—	:::	Lot Size	8,800
Purchased Date	1954	:::	Beds	2bed+den
Days on Redfin	7	:::	Baths	2
$/Sq-ft	$507	:::	Year Built	1954
20% Downpayment	$177,600	:::	Area	Highland
Income Required	$222,000/yr	:::	Type	SFR
Est. Payment*	$4,490/month	:::	MLS#	A08034464

*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%

During the heydays of the RE boom it was next to impossible to find something in the Highlands for under $1MM. Today we have a listing on the slopes of Santa Anita Avenue for $888k. It’s an older property, but the interior has been redone with new flooring, windows and a brand new kitchen, but the owner decided to remodel only one of the two bathrooms. The professional landscaping is nicely done, but exterior improvements typically only get about half of the return on investment.

This is a nice house in a nice area, but there are some drawbacks. It’s located on Santa Anita which is a high traffic street and therefore rendering the front yard practically useless. At first glance it seemed like a good deal, but at $507/sqft, it’s anything but one. Yesterday we profiled a REO that’s asking for $265/sqft. Granted this property is in a better area than that, it’s currently priced at nearly double the $/sqft.

The owner sat on this property for 54 years and although they will still make money on the sale, they would have made much more if the property came on the market say 2 years ago. Houses similar to this were selling for $400-$500k back in the early 2000s. With all the bad news (or good news, depending on how you look at it) in the market lately, it’s not completely unrealistic to see prices fall back to 2002 levels.

Comments (19)

KY · March 14, 2008 #793

Hi Grace,

I just saw your blog today for the 1st time and wanted to introduce myself as i’ll be one of your regular daily visitors.

I grew up in Minnesota, moved to LA several years ago for my medical residency, have rented ever since. I’ve been reading most of the major SoCal housing blogs daily, along with the Bigpicture and Mish’s economic blogs. My wife and I are most interested in Arcadia, San Marino, and South Pas, so your blog will be of great interest to us. My wish list:

1. Could you post an overview of the different Arcadian neighborhoods, including major street boundries, why it’s good or bad, etc. For ex, you say “desirable locations like the Highlands, Santa Anita Oaks and Peacock Village…”, but i don’t know anything about them, or how the neighborhoods are defined.

2. Could you do a monthly update re: home prices vs comparable rental rates using actual examples. Like in your “To buy or not to Buy” post with the 3 examples. A monthly “State of the GRM” address, so to speak. I tend to think the GRM is the easiest way to take the pulse of the housing market. I might be wrong though…

3. Include the “Who is SavedByGrace” and “Who is TheArcadian” info in the “About” link. It helped me feel more comfortable with your blog after knowing more about you, but it’s too hard to find. New readers would like an easy to find bio.

I barely have time to read the blogs, so i certainly appreciate your efforts here. Thanks!

SavedbyGrace · March 14, 2008

Welcome KY!

Thank you for sharing your background with us and I’m glad this blog will be of great interest to you. You read my mind regarding the overview of different Arcadia neighborhoods. That has been on my list of things to do and I fully intend to provide neighborhood profiles. Look for the first one sometime next week!

I will try my best to provide monthly or quarterly updates on the price to rent comparisons. And yes, we can certainly add the links to our “Who is…” pages in the About page. Thank you for your recommendation.

TheArcadian · March 15, 2008

Hi KY,

As recommended, I have updated the About page with links to our individual profiles.

Thanks for the tip! Please feel free to comment if you see anything else that requires change.

Beachy · March 15, 2008 #799

Sounds like you want SBG to do a realtor’s work for you.

Are you going to charge a commission, SBG? I hear there are lots of realtor jobs out there 😉

Regarding this property – someone will end up paying 500K for it in about two years (unless it’s pulled off the market).

SavedbyGrace · March 15, 2008

It does take quite a bit of time to keep the site running with new content everyday. Between this site, my fulltime job and another hobby, I’m left with just a few hours to sleep each day. Of course, I’m not going to charge readers for what I do. I do it because I would have done it for my own research anyways. I’m just sharing my findings on the blog, that’s all.

Hmm, I never thought about being a realtor. I probably won’t be very good since I find it difficult to lie, cheat and steal. 🙂

KY · March 15, 2008

Well Beachy, I’m relatively new in the blog world, started reading about 4 months ago. And it never ceases to amaze me the amount of time and information people put out there, without really expecting anything in return.

As i’ve researched houses to buy, i’m finding that Zillow, Redfin, and all the housing blogs are actually doing the realtors work. So what the heck am i paying the realtor up to $24,000 for??

Again, to SBG, thanks for all the work you put into this.

Beachy · March 16, 2008 #820

KY – why would you pay a realtor to purchase a home? I thought you said you were a buyer.

KY · March 16, 2008

test

KY · March 17, 2008 #850

Beachy, you really think the seller pays the whole commission? I don’t think it’s as simple as that.

Check out:
realtytimes.com/rtpages/19990825_commission.htm
Who Really Pays the Commission?

http://www.forsalebyownercenter.com/blog/2006/08/who-really-pays-for-realtor-commission.html

All i care about is that if I use Redfin, the 2/3rds commission rebate goes into my pocket. If I use a trad realtor, I lose that rebate. Sounds to me like i’m the one paying the commish.

Beachy · March 17, 2008 #852

After buying several properties in CA the last 15 years, I personally have never paid a realtor when I buy houses/properties. That would be the utmost in stupidity, regardless if it were a buyer’s or seller’s market. There is never a commission directly paid to the buyer’s agent unless it is expressly written in the contract – or you feel the need to pay them a commission for bringing you to a home (like using “Aunt Sarah” as your realtor). Paying a realtor (a buyer’s agent – as you would be using) is what you stated.

If you are implying that the sales price is inflated by the seller to pay his/her realtor *and* the agent bringing the buyer, then yes, I can see what you mean. But that’s not “paying up to $24,000”? I’m confused – where did you get that particular number?

BTW, I sold my primary residence in January and pocketed the commission that would have gone to an agent that had SOLD my house – if I hadn’t sold it myself and not bothered to use a realtor. So I fully understand the commission structure, after doing it both ways through the years, with/without a realtor. (I explained this to SBG on this blog about a month ago).

In this crappy market, you could probably knock on a seller’s door and not even use a realtor – the seller would be doing backflips that someone was actually interested/able to buy their house. So I’d say you have all the ammo you need to negotiate down that $24K you think you are paying directly to a realtor.

And as for using Redfin – why use them at all? You can represent yourself and just have an escrow company and/or attorney help you with the purchasing paperwork for far less than Redfin will try to eek out of the deal. Redfin just wants to make money off of you. Walk up to the selling agent and hand them a purchase contract. For that matter, call the owner from the phone book and tell them you want to buy their house. THEY work out the commission details with THEIR realtor – not you.

Clearly it is standard operating procedure for the seller to pay the commissions, not the buyer, regardless of that weak 2006 article on HUD housing says. Never purchased a HUD home – never plan to.

KY · March 17, 2008

Redfin’s fee is basically 1% of purchase price after rebate.

$8000 on an 800k house

If an attorney or escrow company charges less than that for paperwork, then sure i would use them. Do they?

Beachy · March 17, 2008 #853

One last thing –

You are a physician, correct? Your argument is akin to saying that your patients pay your bills. In my case it is akin to saying that my clients pay my bills.

I fundamentally disagree with those statements/arguments.

But I fully expect you to be back to argue about it 😉

KY · March 17, 2008

I have never bought/sold a house before, so my understanding of the process is at a grade school level.

but this is how i imagine it:

I buy house for 800k
24k (3%) goes to seller’s agent.
24k goes to buyer’s agent.

if i represent myself, i can ask seller to decrease price to 776k, or i pocket the 24k, or however it’s done. i still feel like i’m ‘paying’ my agent if i use his services. Is this not correct?

I know seller technically pays commission since it states that on the paperwork. I’m just saying that it’s all priced into the transaction. If i do more of the work myself, then i’ll get a discount. If don’t, then I have to pay up for services. That’s what i meant when i said “what the heck am i paying the realtor up to $24,000 for??” when i’m doing the research and house hunting myself.

KY · March 17, 2008

don’t quite understand your physician argument.

Patients pay for my services.
I ‘pay’ for my realtor’s services.

If patients do some of the work themselves, or choose somebody else to do half the work, they get a discount.

If i find and research the house on my own, or use a lawyer/redfin, then i’ll get a discount.

Beachy · March 17, 2008 #857

Oh, okay – got it on the 24K. Totally agree with you on that. Very little value in paying a commission to anyone, when you are doing the research and legwork yourself.

But if you want to buy a house, let’s say for 800K – there is no reason for you to assume that the commission is going to be split equally (or even paid) to realtors on *each* side, and at the tune of $24K per agent.

That’s what I mean when I say – why pay Redfin, why pay a buyer’s agent? If you identify a property that is on the MLS and currently contracted with a realtor, the only commission that must be paid is to the listing agent. But you can easily negotiate with the seller and the agent, and keep what you would see as the partial commission by not using a buyer’s agent OR Redfin, and paying a reduced price for the property. You simply have to get the paperwork yourself, and if you want someone to hold your hand with the paperwork, hire someone independently to the tune of about $500-1000 to do it (depends on a few things, but generally speaking). It sure beats paying 15-20X those numbers.

Technically, the listing/selling agent will still be making money off the sale – and from the dollars you bring to the transaction, as you have noted. I guarantee you though, when it comes time for you to sell said house, you will instantly see it from the seller’s perspective and the commission that YOU pay directly to the listing agent. If you choose to contract with an agent, that is. 🙂

I own a brokerage (not RE related). In order to purchase something, clients *must* use a broker in my business. That’s how I make money – you can’t buy direct. But in RE, you often can. It just takes a little knowledge and effort.

Doesn’t mean RE agents are going to go the way of blacksmiths and travel agents. I have used excellent realtors in the past, and will in the future. It just means that you don’t, always, have to use them, or pay standard commission in every case.

And the 6% thing is long gone, at least where I live. Buyer’s market! You are in the driver’s seat.

KY · March 17, 2008

Ok, finally we’re talking about the same thing. Forgive my rookie-talk in the 1st post.

I was getting frustrated with a realtor i was working with, because i kept asking for comparable rentals, and he said it’s too hard to find those. He asks me when i’m thinking of buying, and i say when it’s cheaper to buy than to rent. And so on…
Plus, my wife and i kept finding more places and more info than he was giving us. So i hated the idea of him getting a commission. So Redfin seemed like such a great deal at that time. Especially since their search site is the best i’ve found so far.

As a 1st time homebuyer, i think it’s safer to hire a pro to go through the paperwork. Esp if it’s only 500-1000. Thanks for the info. What’s the best way to look for someone?

KY · March 17, 2008

BTW, are you a financial brokerage? Insane about the Bear Stearns deal huh? A long-standing big-name institution blowing up like that..

SavedbyGrace · March 17, 2008 #865

Glad to see you two finally understand each other’s point and props to both of you for your input. Things have been so busy at the office I didn’t catch up on this thread until now.

I almost dropped my phone when I read the Bear Stearns headline this morning. That’s what I get for not keeping up with the news over the weekend.

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