Monday, October 29, 2007
Too bad the education system is so bad in England. Poor Kelly can't write proper grammatical sentences or spell very well for someone with a college education. Maybe she's majoring in Scam 101. I'm sure she'll make a great tenant though!
A commenter (LRK) has offered the suggestion that I try to rent out the properties and that is what I am going to try to do at this point. With winter approaching (very slow sales season) and heating bills threatening to take more of my money, that seems the only reasonable recourse. My big concern is how low a rent will I be forced to take on my Cheektowaga property. My monthly net is -$2300 and no properties here rent for that amount. I've got the properties listed on Craigslist and with various relocation/ temporary housing websites. Advertising in the Buffalo News is like throwing cash down the toilet, so signs are the only other means I can think of doing at the moment.
Tuesday, October 23, 2007
I have been watching real estate flip shows over the last few months while sitting in limbo waiting for my properties to sell. "Flip this House", "Flip That House" and "Property Ladder" have been standard fare on Saturday night. "Property Ladder" is the most amusing as it usually highlights clueless people who, given the advice of a professional, learn some hard lessons. Despite their mistakes and ignoring the expert advice many make lots of money. Which highlights the most important lesson in real estate - location can overcome ineptness, ignorance and stupidity much of the time. None of the shows I watch feature homes in Buffalo. The houses are always located in a thriving metropolises of CA, TX, SC or CT.
Which brings me face to face with why my rehab is not selling. This is a beautiful home that has everyone who enters it exclaiming how wonderful it is. It's located in a great neighborhood of well kept homes. I've not heard a negative comment yet about the house itself. But there are two comments people make - "too expensive!" or "taxes are too high!" We started out at at a price of $219k and are now down to $199k but one comment we still get is "taxes are too high" (taxes are $7800). Now this is a house that has 2800 sq ft of living space and at $199k is selling at only $71 per sq ft. It's assessed value is only $165k , so I guess people are thinking it will be reassessed once it is sold and taxes will go higher. Houses of similar size located in the neighborhood are all assessed the same so the possibility of getting the assessment lowered is slim to none.
Five hundred yards to the north houses are selling for over $100 per sq ft. The difference is that you cross from Cheektowaga to Amherst. Both cities border Buffalo but Amherst is known for its good schools, while Cheektowaga has schools which are not so good and rife with racial problems. Cheektowaga is where inner city blacks are moving and Amherst remains largely white.
When I had researched the house for comparables, the only house that had sold in the last 2 years of similar size and style in Cheektowaga was the one I bought (for $182k). There had been multiple sales in Amherst within 0.5 miles in the $250k-$350k range of similar homes. To the eye, the neighborhoods looked identical, but crossing the townline makes all the difference in the world.
I recently found a top notch Realtor and he told me that only 5 homes have sold for a price of over $200K in Cheektowaga last year. He blamed the taxes, but Amherst has similar taxes. So is it schools, racial composition or some other factor making Cheektowaga a bad location? One thing I have noticed is that 98% of the people viewing this home are black. It's a desirable location for blacks who want to leave Buffalo. Whites who wander into my open houses will just turn around and walk out when I tell them the house is in Cheektowaga.
But the kicker is that I have learned that there are only 785 black households in all of metropolitan Buffalo who would qualify for the loan and pay the taxes on this property. That is a very small pool of buyers. In a sense, the Realtor is right that taxes are limiting the prices of houses in Cheektowaga. But the ultimate reality is that this is a town where whites are moving out and blacks seeking to flee Buffalo are moving in. Buffalo is a poor city and the good paying union jobs are disappearing.
So what were my mistakes in buying and selling this property?
- I did not recognize how much influence a town line made in price. Even though no one would recognize the difference between Amherst and Cheetowaga driving the neighborhood, there is a substantial difference in a buyers mind.
- I did not realize that there was a strong racial component to this neighborhood. Over 98% of the 200 people that have visited the open houses have been black. It is possible that a white family will buy this but not likely at all. This also reduces the possibility that a relocating black family will buy this house.
- I did not realize how limited the pool of successful blacks are in the entire Buffalo metro area. If my assessment is correct that only a black family will buy this house, that means less than 0.079% of the people in this area can afford it. To sell I will have to reduce price drastically to increase the pool of buyers or wait longer.
- I did miss on improvements that were needed and spent ~$15k more than I had estimated. Had I used a contractor like the people in all those flip shows used I would have spent about $20k more than I did spend and would really be in the hole, so I feel only partially bad about this.
In the end though, I think it is all about location. Location influences the pool of buyers. There aren't many buyers in Buffalo able to spent the outrageous prices for home as seen on the flip shows near big cities. In my case, the demographics are working against me.
Monday, October 22, 2007
The results? Four people showed up, no one was willing to put in any type of bid. So much for a "sure fire" way of selling a house.
I've advertised my expensive rehab for next weekend using the same technique. I've direct mailed postcards to every person in Buffalo that could qualify for loan for this house as well. I hope I get some offers on that house since I'm bleeding $2300 per month on it. My biggest fear now is that no real estate is going to sell until the spring.
Friday, October 19, 2007
I attended the local real estate club meeting on Wednesday and passed out about 30 flyers. Typically there are over 100 members at these meetings but this week the topics did not have any draw, so attendance was lower than my expectations.
So, I'm not sure if I am going to get any bidders this weekend. On the other hand, signs seem to be the best draw, so I will put out lots of signs tomorrow.
Thursday, October 18, 2007
It's looks like I will be buying a new house in the next 60 days. I had a seller accept an offer of $269,000 on a 3200 sq ft contemporary home in my town. The seller had paid $290k for the house and had upgraded the kitchen and put on a new roof. The house is assessed for $339k.
After 9 months on the market and moving to Arizona they became one of the desperate sellers that you read about. The seller had dropped the price from $350k to $290k and had 3 interested parties. We all put in offers, surprisingly, the offers were all around $265k. We had included $5k in seller concessions and our offer was rejected initially. But we upped our offer to $270k without concessions and no one else was willing to raise their offer, so we got the house.
The plan is to rent out our existing house. Maybe a "rent-to-own" offer might work. There are few properties for rent in our town as it is quite desirable to live in. I think that we can still extract more value from our existing home by doing some upgrades. The new house also has potential for upgrades to add value.
At any rate, my wife (who has been unhappy with our current home since we married) is overjoyed with the new house.
Monday, October 8, 2007
The steps given by the book:
- place an add a week before the sale date in local papers (I put ads in Craigslist as well as weekly and daily papers)
- price it lower than you might want to sell it for
- hold open houses so potential buyers can inspect the property on Saturday and Sunday
- Have a bid sheet at the open houses so that the buyers can place a bid on the property and everyone can see the bids
- call bidders on Sunday evening and do a "round-robbin" bidding, calling each successive bidder and see if they want to raise their bid
- sell house to highest bidder
So, I am going to try to sell this house on the 21st of October.
I had an open house for the Cheektowaga home this weekend. I had 15 people look at it (that's 13 more than the Realtors showed in 2 months while they had it listed!). Every one loves the house- no one wants to pay @$%# Cheektowaga's taxes.
Wednesday, October 3, 2007
The first quarter of this year was a heady time as I bought 2 houses through what I thought were great short sale deals. However, the real estate market has not been kind and I have been unable to sell either house or purchase new properties. One property that I own that I have "sold" twice through lease-purchase options continues to cash flow very nicely, but this has not been a good time to flip.