$875K? Are they kidding?
A reader asked me my thoughts on this listing.
This property is being marketed in a way that really grates on me as well as any educated buyer. Let me just quote from the property description on www.caar.com MLS#462250:
INCREDIBLE VALUE...$60,000 below recent appraisal. New Custom Home in BeauMont Farm, in the IVY/Free Union area and the Meriwether Lewis Elem. School district. Historically inspired design with architectural details reminiscent of the classic southern home while incorporating a thoughtful floor plan that accommodates today's lifestyles. A wonderful home with high quality construction and custom appointments throughout. Terrace Level has 10" ceilings & plumbing for 2 baths. Finished March 09.
Here is the irritating part about it, the 2009 Tax Assessment done in January 2009 is for $832.8K! So that little part about $60K below recent appraisal, one has to assume that is wasn't the tax collector. And in this case I believe the tax assessor has over assessed this property more about that later.
Second thing that I don't like about it, is that the realtor does not provide any internal shots of the house at all. Is the custom finish of such high quality that it is impossible to be captured on film? Maybe I am reading a bit too much on this but they said finished in March 2009, did everything get done in the last couple of days? According to county records they have been building this house since 2007.
I am wondering if the lack of photos is just a lure to get customers to call the agent and then waste their time and the agents time when they actually see inside the house. If a house is really high quality then a good realtor will have tons of pictures highlighting the property.
The land was purchased by Woodland Builders for $205K on 5/5/2007. Obviously they overpaid. Here is why. That land was purchased 10/17/1997 for $72K. Being generous let us assume that for the time that it wasn't overpriced back in 97. In 10 years the value of the land almost tripled in value? In fact the tax assessor never raised the assessment value of the land until the boom boom years of 2005. It jumped to $142.5K and reached its peak at $213.8K in 2008... this is just the LAND ASSESSMENT!
From looking at the pictures that I can see of the house I would value this construction only at $100/sq ft. There also appears to be some discrepancy between what the county believes is complete and what the realtor is promoting the property. According to the realtor it has 3,875 sq ft of finished space, and 2,700 sq ft of unfinished space. But according to the county there is 3,681 sq ft of finished space, and 2,061 sq ft of finished basement space. Not exactly sure where the realtor is getting their numbers.
To make my pricing estimate I am just going to use what the realtor said at 3,875 sq ft of finished space on 2.26 acres.
My pricing would be $387,500 for the improvements (3,875 finished sq ft at $100/sq ft) and the land I believe is better appraised back in 2004 at $90K.
I think a fair price would be $477.5K. What do you think?
Give me your feedback anonymously by checking the box below marked Worth More, Priced Right, Worth Less as compared to the price of $477.5K.
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| Total Acres | | 2.2570 | | Primary Prop. Address | | 3080 BEAU MONT FARM RD | | Other Address | | N/A | | Property Card(s) | | 1 | | Lot | | 19 | | Property Name | | N/A | | Subdivision | | Beau Mont Farm | | | Notes | | L-19 BEAU MONT FARM / / / /
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| Owner | | WOODLAND BUILDERS INC | | Address | | 1923 OLD BALLARD FARM LN
CHARLOTTESVILLE VA, 22901 | | | Owner as of Jan 1st | | WOODLAND BUILDERS INC | | |
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| Year | | 2009 | | Assessment Date | | 01/01/2009 | | Assessment Reason | | Reassessment | | Land Value | | $205,000 | | Land Use Value | | $0 | | Improvements Value | | $627,800 | | Total Value | | $832,800 | | |
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| Previous Owner | | HOFAWGER, ROBERT E OR BETTY | | Owner | | WOODLAND BUILDERS INC | | Sale Date | | 05/15/2007 | | Sale Price | | $205,000 | | Deed Book/Page | | 3418/124 | | Validity of Sale | | Valid Land | | |
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| State Code | | Single Fam Res up to 5 acres | | | Tax Type | | Reg. Taxable | | | Parcel Level Use Code | | Single Family | | | Primary Zoning Designation | | Rural Areas | | | Appraiser | | JSD |
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| Card Type | | Residential | | |
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| | | Well / Septic.....1 TOTAL VALUE
| | | | Whirlpool w/ Separate Shower.....1 TOTAL VALUE
| | | | No Service - Jurisdictional Area Designation | | |
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| | Garage, Attached Frame.....529 sq ft | | | | Porch w/ Patio Under.....200 sq ft | | | | Porch, Wood Floor.....370 sq ft | | | | Porch, Wood Floor.....60 sq ft | | | | Deck, Wood.....308 sq ft | | |
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| Comm. Section | | N/A | | Card Level Use Code | | Single Family | | Year Built | | 2008 | | Year Remodeled | | N/A | | Condition | | Excellent | | Grade | | A- | | Number of Stories | | 2 | | Story Height (ft) | | N/A | | House Type | | 2 Sty Transitional | | Finished Sq. Ft. | | 3,681 | | Basement Type | | Full : Walkout | | Basement Garage Doors | | 0 | | Bsmt Fin. Sq. Ft. | | 2,061 | | Bsmt Tot. Sq. Ft. | | 2,061 | | Attic Type | | N/A | | Attic Tot. Sq. Ft. | | 0 | | Roof Material | | Dimensional | | Heating | | Heat Pump | | Cooling | | Central Air | | Fireplace(s) | | 1 | | Fireplace Type | | Gas Fireplace | | Wall Framing | | N/A | | Exterior Covering | | Hardiplank | | Bedrooms | | 4 | | Dining Rooms | | 1 | | Family Rooms | | 1 | | Full Baths | | 3 | | Half Baths | | 1 | | Total Room Count | | 9
(Every unit assumed to have kitchen and living room. Bathrooms are not included in total room count.) |
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| Land Use | | Homesite 1 | | Acres | | 2.2570 | | Sq. Ft. | | 98314.9200 | | Rate | | $205,000.00 | | Adj Rate | | $205,000.00 | | Base Value | | $205,000.00 | | Adj Amount | | $0.00 | | Value | | $205,000.00 |
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| Year | | 2009 | | Assessment Date | | 01/01/2009 | | Assessment Reason | | Reassessment | | Land Value | | $205,000 | | Land Use Value | | $0 | | Improvements Value | | $627,800 | | Total Value | | $832,800 | | | Year | | 2008 | | Assessment Date | | 01/01/2008 | | Assessment Reason | | Reassessment | | Land Value | | $204,300 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $204,300 | | | Year | | 2007 | | Assessment Date | | 01/01/2007 | | Assessment Reason | | Reassessment | | Land Value | | $213,800 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $213,800 | | | Year | | 2006 | | Assessment Date | | 01/01/2006 | | Assessment Reason | | End-of-year Rollover | | Land Value | | $142,500 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $142,500 | | | Year | | 2005 | | Assessment Date | | 01/01/2005 | | Assessment Reason | | Reassessment | | Land Value | | $142,500 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $142,500 | | | Year | | 2004 | | Assessment Date | | 01/01/2004 | | Assessment Reason | | End-of-year Rollover | | Land Value | | $90,000 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $90,000 | | | Year | | 2003 | | Assessment Date | | 01/01/2003 | | Assessment Reason | | Reassessment | | Land Value | | $90,000 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $90,000 | | | Year | | 2002 | | Assessment Date | | 01/01/2002 | | Assessment Reason | | End-of-year Rollover | | Land Value | | $73,500 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $73,500 | | | Year | | 2001 | | Assessment Date | | 01/01/2001 | | Assessment Reason | | Reassessment | | Land Value | | $73,500 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $73,500 | | | Year | | 2001 | | Assessment Date | | 01/01/2001 | | Assessment Reason | | End-of-year Rollover | | Land Value | | $73,500 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $73,500 | | | Year | | 2000 | | Assessment Date | | 01/01/2000 | | Assessment Reason | | End-of-year Rollover | | Land Value | | $71,300 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $71,300 | | | Year | | 1999 | | Assessment Date | | 01/01/1999 | | Assessment Reason | | Reassessment | | Land Value | | $71,300 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $71,300 | | | Year | | 1998 | | Assessment Date | | 01/01/1998 | | Assessment Reason | | N/A | | Land Value | | $75,800 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $75,800 | | | Year | | 1997 | | Assessment Date | | 01/01/1997 | | Assessment Reason | | N/A | | Land Value | | $75,800 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $75,800 | | | Year | | 1996 | | Assessment Date | | 01/01/1996 | | Assessment Reason | | N/A | | Land Value | | $70,000 | | Land Use Value | | $0 | | Improvements Value | | $0 | | Total Value | | $70,000 |
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| Previous Owner | | HOFAWGER, ROBERT E OR BETTY | | Owner | | WOODLAND BUILDERS INC | | Sale Date | | 05/15/2007 | | Sale Price | | $205,000 | | Deed Book/Page | | 3418/124 | | Validity of Sale | | Valid Land | | | Previous Owner | | N/A | | Owner | | HOFAWGER, ROBERT E OR BETTY | | Sale Date | | 10/17/1997 | | Sale Price | | $72,000 | | Deed Book/Page | | 1648/678 | | Validity of Sale | | Valid Sale |
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| Elementary School District | | Meriwether Lewis | | Middle School District | | Henley | | High School District | | Western Albemarle | | |
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| Magisterial District | | Jack Jouett | | Voting Precint | | Jack Jouett | | |
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| Census Block Group | | 1 | | Census Tract | | 102 | | |
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| Primary | | Rural Areas | | Secondary | | Unassigned | | Minor | | Unassigned | | Other | | Unassigned | | Proffered? | | No | | | Natural Resource Extraction Overlay? | | No | | Flood Hazard Overlay? | | No | | Airport Impact Area? | | No | | Scenic Stream Overlay? | | No | | Entrance Corridor? | | No | | |
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| Comp Plan Area | | Rural Area 1 | | Comp Plan Land Use - Primary | | Rural Area | | Comp Plan Land Use - Secondary | | Unassigned | | Comp Plan Land Use - Minor | | Unassigned | | Comp Plan Land Use - Other | | Unassigned | | |
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| Land Use - Primary | | Residential -- Single-family (incl. modular homes) | | Number of Structures - Primary | | 1 | | Number of Dwelling Units - Primary | | 1 | | | Land Use - Secondary | | Agricultural | | Number of Structures - Secondary | | 0 | | Number of Dwelling Units - Secondary | | 0 | | | Land Use - Minor | | Unassigned | | Number of Structures - Minor | | 0 | | Number of Dwelling Units - Minor | | 0 | | |
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| Subdivision | | Beau Mont Farm | | MPO/CHART Area? | | Yes | | Traffic Analysis Zone (TAZ) | | 138 | | Jurisdictional Area Designation | | No Service | | Watershed | | South Fork Rivanna (above reservoir) | | Water Supply Protection Area? | | Yes | | Development Area? | | No | | Other Rural Land? | | No | | Ag/Forest District | | N/A | | Conservation Easement? | | No |
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Posts
This comment has been removed by the author.
ReplyDeleteThis comment has been removed by the author.
ReplyDeletethis home below was on market for about a year, i think, and sold for around 500k i believe about a yr ago. so if the market dropped another 15% from last yr, and got about 200$ per sq ft with land, the new home you are questioning would be about 550 to 575.
ReplyDelete"2905 Beau Mont Farm Road, Charlottesville VA 22901"
ReplyDelete2905 Beau Mont Farm Rd was built in 1996 it sold for $360K in 1997,and $385K in 2000. Up until 2004 the house was assessed for $442K. That was before the bubble started to grow here in Charlottesville.
ReplyDeleteJust because others bought during bubble pricing doesn't make it right.
this developer understands the current market, you would think. he knows he is not getting 850k. his plan is to get a decent offer and then say "ok, i will sell it for 250k less than list", but you gotta buy today. i was following another home off garth road and they recently raised it 50k. might be an interesting strategy; set high price and then get people focused on the discount they received. only works if the house is compelling to begin with.
ReplyDeleteAnonymous,
ReplyDeleteThe strategy you are suggesting is not a new one, it is called over pricing. It assumes a dumb buyer, which is possible in this market, but not they are not as common as they were several years ago. To an educated buyer this strategy is insulting.
Of course it doesn't help when buyer agents become complicit in the duplicity by encouraging buyers that it is a good price.
From what I have heard the seller is telling everyone that he already has an offer for $700K, and is waiting for somebody to top it. To me that just sounds like negotiating, and hoping a sucker is out there.
There are a lot of weird real estate marketing practices here in Charlottesville that I have not seen anywhere else. For example, taking a listing off the market for a rest. That was a direct quote. More likely they just want to reset the days on market count.
The price raising you are seeing is probably due to the amount of money the seller had to draw down in order to keep the house on the market. The longer it takes to sell a house the more the seller has to borrow or spend to keep it on the market.
I'm a first time home buyer (and not an agent), and I strongly considered this house. I think your assessment is way off.
ReplyDeleteI wouldn't be surprised to see this house go for north of $725-750. I'm not sure why the agent hasn't posted pictures, but the inside of that house is top quality. They certainly have nothing to hide -- far from it. I think the work there is impressive as compared to other new construction on Old Ballard, Morgantown, and Ivy.
I also think the square footage is probably accurate. It's an enormous house, with an incredible unfinished basement. Someone is going to get a lot of value out of that place -- and in a neighborhood with very even homes, low traffic, and some great views on the end of the street.
If this house has a problem, it's that it's set low off the road. But I don't think that's a major drawback. $875 might be high, but it's not an insane starting price. An offer at 90% of asking would be 787.5. At that price, I think the builder could sell it.
Anonymous,
ReplyDeleteCouple of questions:
1. If you liked the house so much why did you decide not to purchase this house?
2. How did you come up with 90% of asking price to discount it?
3. What do you think is fair value for $/sq ft for a builder?
Some answers:
ReplyDelete1. We decided we preferred to live in the city. But it was a close call, and we were very impressed with the neighborhood at Beau Mont Farm. The drive out to Garth is much easier (and, I think, safer) than the drive on Ivy, or Old Ballard and related roads. And more scenic.
2. In this price range, I don't think we're seeing declines of much more than 10% off assessment on newly renovated homes or high quality new construction. I could be wrong about that, but it would help to see some clear counter-examples. A lot of the data seems to be based on homes in the < 500-550 range, where there is a lot more inventory within 10-15 minutes of downtown Cville.
From our experience over the last few months, which is admittedly limited, well-finished houses in the $700-900 range, priced at or reasonably close to assessment are attracting interest. And we've watched a number of them sell, including a couple with competing offers.
3. I don't know what a fair value for $/sq should be in the county. But had we decided to live out on Garth, I would have felt comfortable paying $200/ft for the house you have listed above.
You should go see the place. I think you would revise your estimate after walking around that house. Maybe you still wouldn't pay what I would have, but I don't think you could come close to justifying $480k.
Anonymous,
ReplyDeleteThank you for your response, and sharing your thoughts.
I think the reason that we are seeing more data on the < $500K transactions is that is where the buyers are feel that there is value in purchasing.
At $875K and assuming a $175K down payment and at 6% interest results in a $4,197/month mortgage. Not including property tax and insurance to be able to qualify for the loan banks are going to be looking for at least $150K/year. Not impossible to find a buyer like that, but definitely less likely based on Charlottesville's demographic and the declining economy.
I have watched a number of recently finished houses that are in the same market range, and I don't see anything that has moved in the last quarter. Could you point out one of them?
In my opinion $226/sq ft is an obscene amount of money for the builder. Since the realtor has done the property a great disservice by not showing any pictures inside the property, it is hard to tell what kind of quality it is on the inside.
You have to wonder is this just a case of a bad realtor that doesn't know how to take pictures, or a house whose value can only be sold in person. I have a basic philosophy that "When there is doubt, there is no doubt."
That's the beauty of the Internet, a well marketed house (lots of pictures online), people don't need to drive to the house to see if they are interested, or be brow beat by a realtor trying to convince them that they really are going to love the house.
If the house is good, it will sell all on its own.
I agree that the realtor isn't doing this house any favors. But I've been in it, and the quality level is high. I'm not saying the sinks are lined with gold, but the builder has done a good job there.
ReplyDeleteAre the houses you're watching listed at or just under assessment? I'd be surprised. Many sellers still don't have their houses reasonably priced, and houses at 10% (and sometimes far more!) above assessment in this market range aren't moving. But I know of at least three homes (none of them new construction) currently under contract, and all of them were priced basically at or below assessment.
The demographic for this market range may not be large, but it exists. And the supply in this range is still thinner than you might think.
Anonymous,
ReplyDeleteSince January 1, 2009 there have only been 2 sales of homes that have recorded in Albemarle county that have been constructed in 2008 or 2009 that have sold for more than $700K.
Those are:
6927 Windmere Lane for $700K on 2/20/09. At $131/sq ft this is still questionable since it is old trail and I have yet to see true high quality construction. Additionally the almost half-acre parcel is appraised at $190K for a half acre. Which is what the builder paid for it last year, but that doesn't mean that an acre of land is worth $480K.
1132 Cambridge Hill Ln for $1.185M on 1/13/09. At $194/sq ft this is more likely somebody who just HAD to live in Glenmore and money wasn't an issue.
There may be other pending or contingent sales but none have recorded with the county.
Let me know which ones you think actually sold.
Regarding the demographic availability I would argue that for $900K there are a lot of better deals to be found than this house. At that price point it would be cheaper to buy land and build since construction is at a all time low.
I know of at least three other pending sales in this range, and I'm sure there are others. I'm not entirely comfortable posting the addresses online, but there's no question that each of them is under contract for prices near or below assessment.
ReplyDeleteI'm not sure why $900k is the right price comparison here. I don't think the house above will sell at $875. But it might sell at $780 or so. Do you think there are better deals at that price? I think there are some comparable homes within 10-15 minutes of Cville. But if you don't include homes in Glenmore, Keswick, or Crozet, and if you consider other factors along with $/sq. ft., I'm not convinced.
In any event, your estimate of $480 is still unjustifiably low. I don't think you could walk through that house and reasonably offer anything under $625-650, and that would be lowballing.
1. If "anonymous" knows of three other pending sales in this price range, then "anonymous" is in the industry.
ReplyDelete2. Just because several people may be financially stupid enough to overpay for a house that's going to immediately drop in value once the transaction is closed doesn't mean anybody else should be. It also means the buyer isn't paying attention to local or national data, or to this blog or the bubble blog.
3. The sellers and the sellers' agent think it is 2006. Best of luck to them.
Ted - Excellent post, thank you for your feedback!
ReplyDeleteAnonymous,
This is getting silly, you can't say that you know of 3 pending sales and then not disclose the properties. If they are actively being marketed they would show an ACS (Active Continue to Show) status and that is not confidential by any stretch of the imagination.
In regards to your comment that $480K is still unjustifiably low, I would just ask you to look at the neighborhood. Of the 34 properties in that neighborhood that I have sales information for the median sales price for the entire neighborhood since 10/19/90 till today is $447K. Compare that to median 2009 assessment of $672K and I don't think I am off too much.
A few responses:
ReplyDelete1. I'm not in the industry. I'm a first-time home-buyer who has been watching this market carefully for the last twelve months. I've watched some of the houses that interested me leave the market, in some cases after I'd bid on them. So at least I know what the minimum offer was and that competing offers didn't pay over asking -- which in all cases was near (and not more than 2-3%) above assessment.
2. The homes I'm describing aren't currently being shown, and I'm still not comfortable describing them. When their sales prices are posted after closing, I'll be happy to point them out.
3. Until you visit the house described above and see the quality of the work done there, you don't have much of an argument (except that the realtor should have posted pictures -- and should still post them). You can crunch the numbers, but, after walking around in that house, you couldn't make an offer for $447k with a straight face. I would believe that the builder has an offer for $700k. You might think that's too high, but that doesn't really matter. What matters is that he's making the calculation that he can get more and is willing to wait. And he's probably right.
I'm not sure why a median price for sales since 1990 (?) tells us anything interesting about the current market. If houses are selling at 10% under assessment, we're still looking at roughly 2006 prices in this range of the market. And, so far as I can tell, you don't have any data showing that houses priced under current assessment aren't selling. At least I've got anecdotal evidence (which I realize I haven't shared, but which is enough to convince me, for whatever that's worth), that houses priced at or below assessment are both attracting interest and selling.
4. People aren't stupid because they pay assessment (or below) in the current market. Some people need to move away, and some people need to move here. It's true they could rent, but that can be disruptive. Some people prefer the stability of ownership, etc. And some people have time horizons long enough to wait in case there is additional market decline (which is easily foreseeable). But buyers today certainly aren't paying peak-of-the-market prices, and they can reasonably make the decision to enter the market, knowing full well that it might not have bottomed yet.
5. I have learned an enormous amount reading the Bubble Blog and following Scott's comments. I think there's something to the claim that housing prices are inflated in Cville, that assessments are still too high. But I think these criticisms can be taken too far, and some of the claims about the Cville bubble are over-stated. At least in certain segments of the market, high-quality houses priced near assessment are going under contract. Maybe the buyers are irrational, or maybe they're getting decent prices at very low interest rates, and betting that, even if the market drops further, they are still getting in at a relatively good time.
Anonymous,
ReplyDeleteThanks again for contributing more info, let me respond to your points:
1. As a first time home buyer are you renting in the city? In regards to the houses that did sell that you did make a bid on, which were those?
2. Fair enough, it seems odd that they wouldn't be marketed if they were truly trying to sell them, but when they close let us know.
3. If the builder has an offer for $700K that is not contingent then he should take the money and run. Personally I think the builder is just using this as a negotiation technique to get higher offers.
Buyers can offer whatever they want. There is no code that requires them to bid + or - 10% of a sellers listing price. Similarly as we have seen there is no code to prevent Seller's from listing their prices at exaggerated levels.
The median price of the neighborhood tells you how much money has been put into this neighborhood over the entire period. There have only been 12 sales in 5 years in that neighborhood.
I am glad that your are convinced with your own evidence that you haven't shared with anyone else, but understand that I will remain skeptical until you do share your examples.
If you look at my most recent post you will see how that houses that have sold within the last 3 months have sold within $60K of the 2009 Assessment.
That doesn't mean that I think the 2009 assessments are correct, but rather that the Buyers are paying attention to assessment values.
And In this case I believe the assessment has been overvalued on purpose by the builder in order to support their selling price. I don't think the appraiser did a good job on this house.
4. It sounds like we are saying the same thing.
5. Buying real estate is a lot like buying into the stock market. It is all about time horizon and expectations. If a Buyer has a long time horizon and the funds to keep the investment it may not matter. But no one likes to buy before it drops again. And my read on the market is that the housing prices will continue to drop to more realistic levels. Even the so-called high-quality construction ($200/sq ft) will be brought down to realistic levels. Primarily this is because builders will be faced with the reality if they at $200/sq ft they are pocketing more than $100/sq ft in profits they have room to give.
Anonymous, once again thank you so much for adding a lot to the conversation. You seem quit passionate about this property. Perhaps you will buy it one day? (smile)
A few more replies:
ReplyDelete1. I'm renting in the county. As before, I won't disclose any offers/houses. (But you can keep trying!)
2. The fact that there have only been 12 sales in 5 years in the Beau Mont Farm area suggests to me that people really like living there. There's not much turnover in those houses, which only reinforces my view about the quality of the neighborhood.
3. I don't think our views are all that far off from each other. I think assessments are still too high, and that many sellers are asking outrageous prices -- there are lots of examples of homes in this market range priced 20-30% over assessment. Those prices are ridiculous.
But on the flip side, some homes have been priced near, at, or just below assessment, and buyers are taking a closer look. If one of your themes here is that buyers are paying careful attention to assessment (and the history of assessments), I completely agree.
4. I'm not going to buy this house. I was just reading your blog, noticed your estimate, and, having seen the house and been reasonably impressed, thought your price was wrong -- and chipped in my two cents. I still think you need more information about the work inside a house before you make a call on price.
Thanks for all your responses -- you're definitely keeping people honest.
Some facts-
ReplyDeleteI recently made an offer on the house in question for $700,000.
I loved the house (and neighborhood) and felt it was probably worth a little more than that, but not much more (max $750,000). My valuation was very unscientific - I have been watching the real estate market in Charlottesville since 2002 and in other places for an additional 5 or 6 years and have built up a gestalt of what I think a house is worth, what I would be willing to pay for it and what I believe others would be willing to pay. I am by no means an expert.
After receiving the offer, the builder stated he had an offer on the table for $800,000 and "could I do better then that?" I will leave it up to you to decide whether or not this $800,000 offer was fiction, but I can tell you if it is real, it is probably the highest offer the builder will ever get and he should take it.
Personally I would not pay anymore then $700,000 as I feel that even though it might be worth a little more than that right now, chances are that in a year or so, for $750,000 I will be able to purchase an even nicer home.
I am happy to wait and watch because one thing is for sure, overall the housing market, especially in the $500,000-$1,000,000 range remains at unsustainably high pricing levels.
Anonymous, as always thanks for the feedback. I don't claim to know the magic number and feedback always helps. Too bad the realtor that is listing this property doesn't know how to use a camera and post pictures of the inside. If they did, it might help my valuation...
ReplyDeleteAg, If the builder has an $800K offer I am surprised that they are not accepting it. More likely the offer is coming from the builder's right hand! (smile)
Scott,
ReplyDeleteWhen I saw this house on your blog I chuckled because it already struck me as blatantly overpriced. But I think your number is way too low at $477.5 with that amount of space and land in a decent location. On the other hand, the asking price is obviously too high since the house has been on the market so long
What do you think is an appropriate sq. ft. valuation to use as a starting point in this market for good-quality construction of this type and land in a good location? Not talking about this particular house.
Philip,
ReplyDeleteAppropriate sq ft for construction varies depending on where you are building. But typically if you have access to good labor and materials a builder can make a decent profit between $70 - $110 per sq ft. They won't retire after building one house, but that's the point right?
Regarding being too low, the builder has $205K in for the land, and probably another $387.5K for the house including his profit. If the builder just wanted to square out he would probably list it for $592K. The problem is that he probably is adding in his cost of carry for the property over the last 2 years that it took to build the property which is probably why he has the price so high up in hopes that somebody will purchase it somewhere near that price point. And since this house is completed if he can make a bit more on the house it might cover his other debts in his other properties.
I seriously believe the last 4 years has brain washed many people to believe new construction runs at $200+/sq ft for good construction. Now that those builders who over extended and over borrowed are sitting on finished properties or half completed projects I will expect things to begin to liquidate as credit lines evaporate. It is all just a matter of time.
Look what has happened with Skyline Home Builders. I think they produce a fine product, but they are obviously feeling the pain of overbuilding and the cost of maintaining the inventory while they try to sell them off.
Hi Scott,
ReplyDeleteWhen I asked my question, I was thinking of value including land. By your calculation, figure $300,000 at $100 per sq. ft. plus 2 acres in a nice location west or nw of Charlotttesville.
So that would translate to maybe $550,000 on a two-acre lot?
I still think your price of $477,000 if I recall it correctly is too low for the house at 3080 Beau Mont Rd. given recent comps although there are few in that range.
While people undeniably have been kidding themselves in recent years, do you really think prices will drop so much so that $477,000 is about right?
From what you say, it sounds like the builder of a new, empty house, almost certainly overpriced, could be a good buy with a lowball offer. But maybe that's true of any of the many overpriced houses on the market, depending on the seller's circumstanes.
Editing above post, I meant it sounds like new, empty house could be a good buy.
ReplyDeletePhilip,
ReplyDeleteIt is hard to include value of land in price/sq ft because all land is not the same. Biggest differences that come to mind:
- Quality of School District
- Crime level
- Proximity to highways, railroads, land fills, and manufacturing
- Topography of the land
Construction costs are easier to compare side by side regardless of the lot. And yes I do believe it is better to buy a lot and build right now if you can find the right builder and the right lot.
From your example wouldn't you prefer a $550K home that was built to your spec, as opposed to an overpriced home that was built over 2 years for $875K?
I am not advising people to lowball. Lowballing to me is presenting a very low offer with no facts. The same way I am not recommending sellers to highball without any facts.
When a seller lists a house for an outrageous price any realistic offer is going to seem like a lowball. The seller just needs to get over themselves and realize that this isn't 2006 anymore and most likely will never be.
If I were interested in this house $477K would be all that I would offer.
But that's me, people are more than welcome to offer whatever they want.
The problem as you noted has to do with the builder's circumstances. If they need the extra capital to cover their other debts their listings are all going to be greatly exaggerated. The problem is that this is a self-defeating strategy. The higher they price their listings the less likely they will sell which just adds to the cost of carry, which means the builder needs even more money as time goes on. Better to cut your price and make money, then bleed out.
I look forward to seeing what this house sells for.
quite frankly, builders have many tricks to squeeze money out of a deal. for all we know, this builder may be looking to hit a home run here or he gives it back to the bank. he may already calculated his finances based on losing his investment. it may not have been his money anyway. i know a few builders in the fla area and the smart ones start preparing for DDay 2 yrs ago. his personal finances and legal plan are probably well in order; he would rather sell it, but the risk of giving back may already be factored into his master plan
ReplyDeleteHi Scott,
ReplyDeleteYou say, "I am not advising people to lowball. Lowballing to me is presenting a very low offer with no facts. The same way I am not recommending sellers to highball without any facts. When a seller lists a house for an outrageous price any realistic offer is going to seem like a lowball."
The latter is what I meant by "lowball"--a realistic offer for a ridiculously overpriced property.
You also ask, "From your example wouldn't you prefer a $550K home that was built to your spec, as opposed to an overpriced home that was built over 2 years for $875K?"
Excellent question. I ask myself whether it is feasible in this economy to do this because how can I choose a high-quality builder, be confident the builder won't go under and successfully monitor the project without knowing anything much about this business, including the tricks builders might play particularly if they are financially stressed? At least with the "low-ball offer" you can see what you're getting.
Philip, Thanks for the feedback.
ReplyDeleteYou bring up a great point regarding finding the right builder. Right now it it so hard to know who you can use that won't either take your money and run, or rob you blind on construction costs.
I was almost tempted to buy and build on a property, but the builder I was thinking of using looks like he is in financial trouble.
Could the agent be reading this blog? After over a year without any pictures of the inside, this property has been relisted with inside pics. Now if only he/she payed attention to the pricing issue! Still listed at $875,000.
ReplyDeleteAg - I think the agent or the builder must be reading this blog. Unfortunately they only took an additional 8 shots. A couple of decent pictures of the kitchen, and then a stream of photos that I take was supposed to highlight the $226/sq ft value of the house.
ReplyDeleteI think this agent needs to be educated on how to photograph a house. I would have preferred more pictures of all the rooms than close up shots of the closets. There is only 1 picture of the master bath, and literally of the bath!
Nothing I saw from the new photos moves me from my $100/sq ft estimate.
considering that Cville is a small town and a fairly insidious real estate market, this house is getting well known and its pricing discussed freely. should be an interesting test case. i cant imagine anyone who sees this blog would be within 200-250 of the asking price, but stranger things have happened.
ReplyDeleteI agree that the pictures still aren't great -- other agents would have done a better job showing off this house. But the comments here are beginning to have the feel of an echo chamber, and one that is out of touch with where the Cville market is.
ReplyDeleteThere has been too much comment here by people who haven't set foot in this house or in the Beau Mont Farm neighborhood. I'm not saying you have to go inside every house that you discuss, but (and all other things equal), where someone has seen the house and someone hasn't, it's hard to accept the claims of the latter. Take half an hour, and go out there -- then tell us it isn't worth $500k, if you can say that with a straight face.
Again, I'm a first-time home buyer, so I would very much like to believe otherwise. But the self-reinforcement going on here isn't realistic. There's no way that house will sell (or should sell) for $447. It's hard to take anyone who argues otherwise very seriously.
Last point: if you're really looking for a house of that size and quality (and neighborhood), and you think you can get it for 45% off in this market, good luck. It's not going to happen. This isn't southern California or Vegas, where there is a vast oversupply of nice houses in prime locations. It's a town with a poorer supply of houses within 10 miles of the University. As a result, reasonably large, high quality houses within an easy drive of the University are going to command higher prices. That's the reality in this market, like it or not.
Ag, I understand your pride for Charlottesville, but lets take it with a dose of reality.
ReplyDeleteLets assume for arguments sake that I am right and the actual value of the property is worth $477K. Do you still feel comfortable paying $700K for it?
The real estate prices locally are trending higher than what you see in Northern Virginia. Where I might add the median income is much higher.
Read on at the Bubble Blog http://realcville.blogspot.com/ on the April 1 post. Good comparison about the reality coming in.
As I stated before the builder can build this house and sell it and still profit at $592K. I have driven to the house and saw the neighborhood, from what I have seen I can still assert to you with a straight face that it isn't worth much more than $477K because I believe the builder overpaid for the land, and the quality of construction isn't worth more than $100/sq ft.
The only echo chamber that has been going on in Charlottesvile is the run up that builders and real estate agents have done in pricing in the last few years. Now that the market is tanking they are clawing for an excuse to prop the prices back up... it's not going to happen.
Charlottesville isn't a major metropolis such that there aren't several communities within 25-35 minutes of driving to it. It all depends on the needs of the buyer. There is nothing unique to that area that can't be found somewhere else. The quality of the construction and the lot is not something to pay a premium for, especially in a market that has an oversupply and small demand.
Perhaps the price won't come down to $477K unless the builder goes into foreclosure, but maybe you will get lucky and he will call you back on your offer for $700K!
man, this guy seems driven to buy this house for 700k. i also think 477 is crazy ( although it may be right, but just wont happen). without all the back and forth on this blog, i would of paid about 550k for it based on comps in the 'hood.
ReplyDeleteif this guy gets 650 or above for it, perhaps the market will come back quickly, as its full of suckers.
Enrique makes the case for the echo chamber. Can anyone here provide clear examples of large, high quality homes in, say, Western Albermarle or Venable school districts that have sold for prices 40% under assessment? Just one?
ReplyDeleteYou can wish the market down as much as you like, and you can wish that builders bought land cheaper (eight years ago ...) to build new, high-quality homes, but there simply isn't a huge supply of 3000+ sq. ft. houses, fully renovated or new, in desirable neighborhoods, within 5-10 minutes drives of the University.
Houses that are 25-30 minutes out from the University are in a completely different market. These are not substitutes. Even houses that are 20 minutes out decline in prices. There is a fairly clear price-perimeter around Cville, which does not include Glenmore, Keswick, or Crozet. Within that perimeter, it would really help to see some data showing anything that would confirm Scott's view of the trajectory of this segment of the market (as opposed to condos, small houses, unrenovated houses, foreclosures, etc.).
Until that data is forthcoming, I'll stick with my anecdotal evidence, which is that houses priced at assessment within that perimeter are selling. There is demand, driven in part by the University (and its professional schools), but also by careful buyers who, unlike some commenters here, think that, while prices may continue to drop, there are opportunities in this market.
Anonymous - You asked if I have a list of properties that sold in Western Albemarle for 40% below assessment. Yes I do, but it is very confidential and I don't feel comfortable sharing that right now, I am sure you can understand... ;-)
ReplyDeleteI don't have to wish the market down... it is going to happen on its own no matter what any of us do. The current price levels are unsustainable. The party music stopped and a lot of people are caught in the middle. Eventually sellers can only carry so much debt... I get NO satisfaction seeing people getting hurt like that. But what gives me LESS satisfaction is when buyers are being lied to that the value is there when obviously it isn't.
As far as near the University, that doesn't mean much. On average UVA doesn't pay their employees enough to fund a house like that. And with the hiring freezes going on, I doubt anybody is going to be jumping a pay grade.
For example:
At $875K with 10% down and at 6% a buyer would need to be making at least $171K a year. At 20% down ($175K down payment) a buyer would need to make at least $152K a year. Name me a bunch of companies in Charlottesville that is providing that level of compensation and perhaps I can believe it a bit more.
I'll bet you dollars to doughnuts that this thread on this property will still be going on a year from now if the seller maintains such a high price point.
If I were the seller I would take AG's offer at $700K.
The difference is: I'm not making any claims about houses being worth half their assessment values. And I'm not claiming that the data provides evidence of that valuation -- or market trajectory to 40% declines. My much more modest claim is: there is interest and houses are moving in a certain segment of the market, i.e., good quality homes, within the 600-900k range, within 10 minutes of the University. I realize that's a narrow market, but the house above is in it.
ReplyDeleteI won't have to wait a year to point to sales in this range of the market. The houses that I mentioned above will close within the next couple months, and then you can judge the market from those sales.
As for proximity to the University, I don't think you're familiar enough with the market. On a Caar search, there are maybe a dozen houses in Cville priced in this range of the market -- and all of them are priced way above assessment, and only a few of them are renovated. It's no wonder they aren't selling. The question is: would they sell if priced at or below assessment?
As for UVA supporting demand, again you're underestimating things. There are faculty looking for homes at all of the professional schools, in administration, and in financial and consulting roles. There are double-income families that can support these mortgages. And there are (still -- believe it!) people moving to Cville with sufficient income and wealth.
I agree that housing prices will continue to decline. But I don't believe they will fall to the levels that you're projecting. And, at least in the range we're discussing (since we're talking about this particular house), I haven't seen any data to show it.
My bet: if this seller priced 5% under assessment, he could sell the house. Call the buyers whatever you want, but they simply don't share your pessimism about the future of this market.
Anonymous2 to Anonymous 1. Watching the show. Does everyone in C'ville have their heads in the sand? The quality of comparable new construction is offered elsewhere in Virginia for easily 50% less (Richmond, Norfolk/Virginia Beach, and yes, NOVA). I have seen it myself. This is why even those of us with CASH will not waste time shopping in C'ville until the list prices and seller/realtor/assessors' expectations come down to earth. Scott's assessment is in the ballpark.
ReplyDeleteAnonymous -
ReplyDeleteI didn't say that all houses would be valued for 40% under assessment, I am saying that this house is worth 40% less than the assessment.
Houses are already selling at or below assessment, the bigger question is will the sell much lower than assessments?
While I would agree that there are dual income professionals that could qualify for it, the median income in Charlottesville doesn't. And even if they could why would they want to overpay in this market?
At 5% discount to assessed value of $832K would put it at $790K. He already has an offer from AG at $700K and not interested in countering...
Your quote: "Call the buyers whatever you want, but they simply don't share your pessimism about the future of this market."
I think you got that backwards... the sales of houses have dropped, the prices have dropped. Check out the Bubble Blog and you can see all the stats.
It isn't pessimism it is realism, but thank you for keeping the discussion interesting! :-)
I read the Bubble Blog, and none of the stats are specific enough to tell us about this segment of the market. The median Charlottesville income isn't relevant either. There are maybe a handful of cities in this country with median incomes high enough to afford this house. But that doesn't matter. What we need to know is whether there are enough buyers inside the income range needed to support prices at or near assessment in this market.
ReplyDeleteIf someone paid $750-790k (90-95% of assessment) for that house, you would say they were overpaying. I would take it as evidence that the market isn't as weak as you think it is. But you would say it's just a lucky break for the seller. So I'm not sure what kind of evidence would be persuasive here.
And pessimism v. realism ... just more speculation on the market ...
Anonymous, I assume this is Anonymous #3? you said:
ReplyDelete"There are maybe a handful of cities in this country with median incomes high enough to afford this house. But that doesn't matter. What we need to know is whether there are enough buyers inside the income range needed to support prices at or near assessment in this market. "
That's what the median income is all about. You don't have a pool of buyers that have a median income of ~$52K/year and then magically have a pool of buyers that have an income stream of $150K. Granted there are buyers out there that have that kind of money, but I doubt they are as common as you think.
As far as evidence goes, CAAR shows that last month 134 transactions were done at a median price of $245,500 after being on the market for 148 days (5 months).
To date 25 listings have sold at a median price of $215,500 after being on the market for 166 days (5.5 months).
You still so sure that median income has nothing to do with it?
"If someone paid $750-790k (90-95% of assessment) for that house, you would say they were overpaying. I would take it as evidence that the market isn't as weak as you think it is."
Hasn't happened yet, and I doubt it will. According to AG the builder has stated that he has an offer for $800K... whether that is for real or not we will have to wait and see.
The difference about my speculation versus others is I am using consistent measurements to value a house:
- I use a range of $70-$110/sq ft for new construction
- I depreciate the value of the improvements over 30 years
- I discount any land purchases that are overpaid
- I don't get emotional about it being Charlottesville
Over the last 4 years buyers have been brainwashed that Charlottesville is a recession proof market, and that the home values never decline. I believe that is just a lie that has been repeated often enough that people started believing it as the truth... that is before the bottom dropped out of the economy.
I don't claim to know the magic number that the seller would sell at, but I try to come to the number where I think the true value of the home is at.
Enrique,
ReplyDeleteperhaps you should not assume that Ag and annonymous are the same person. That may be the reason different profile identities are used.
Your comment "man, this guy seems driven to buy this house for 700k" is a little presumptious. I simply made an offer based on what I think it is worth now. Someone else (annonymous), not I, debated Scott's assessment. I have no interest in defending my offer, but I am certainly not driven to buy this or any other house. I am content to wait and buy the right house at the right time at the right price for me. My $700k offer has expired and I am no longer considering this house.
As for your statement "if this guy gets 650 or above for it, perhaps the market will come back quickly, as its full of suckers" well perhaps I am a sucker, but I am a sucker who started out with nothing and now is in a position to make a $700k offer without any contingencies at a time when, unfortunately, many other people are struggling just to stay afloat.
By the way, no offense taken :)
I have to agree with the anonymous comment above, in effect saying that you can present all the numbers you want based on your own metric saying Charlottesville is overpriced, but there are other dynamics. I say this from the perspective of an out-of-towner who sold a year ago in another, considerably more than expensive area and wants to move to Charlottesville.
ReplyDeleteIt is absolutely correct that as stated, "there simply isn't a huge supply of 3000+ sq. ft. houses, fully renovated or new, in desirable neighborhoods, within 5-10 minutes drives of the University." Or even 15 minutes. On the other hand, those that are available generally seem overpriced indeed based on overall conditions. Which is why many have been on the market a long time.
I agree with the suggestion: "Within that perimeter, it would really help to see some data showing anything that would confirm Scott's view of the trajectory of this segment of the market (as opposed to condos, small houses, unrenovated houses, foreclosures, etc.)"
Scott, of course you're right that the median income matters in the sense of giving us an overall sense of the market. But it doesn't tell us how many buyers are capable and interested in purchasing houses in this segment of the market. For that, we need more specific data. As far as I can tell, you don't have it, and neither do I. But the data that you did produce doesn't include pending sales (right?), and I'm happy to wait a couple months to point to a half dozen houses that sold in this market segment (within the Cville perimeter) over the last couple months. I'm in no hurry!
ReplyDeleteIn principle, I agree with your aim of making pricing more transparent. And as I've said all along, I think you're right that (1) buyers are sensitive to assessments (including assessment history) and (2) housing prices are too high in Cville and Albermarle County. But I think your methodology is far too quick to discount geography, school districts, commuting, quality and safety of neighborhoods, etc. Location matters, and, even when prices were significantly lower (before the boom), some neighborhoods are simply more expensive than others. Your factors, as described in your comment above, don't account for any of this, or for the reasons why people might prefer to live in some places rather than others. Not all locations are created equal in this respect. Houses 25-30 minutes from Cville aren't going to be worth as much (other things equal), as houses that are walking distance to the Rotunda. Take a house (any house) in Beau Mont Farms and plant it in Farmington or on Rugby Road, and you've probably added 25% or more in value. If you think that's an "emotional" reaction, then you're making a mistake about evaluating this market under any conditions. That would help to explain why you've badly undervalued the Beau Mont Farm house, but your numbers will be even further off for homes in even more "desirable" (in quotes here, because its simply a reflection of market outcomes) locations.
ps: I'm the "anonymous" from above -- I'll go by "same" to make things easier.
I just noticed Anonymous 2's comment above, but my response is the same. You have to do some accounting for location (not "emotionally," but nevertheless). It's not enough to compare new construction from Richmond, Norfolk, or DC. You have to be much more specific. Anandale isn't downtown Alexandria; Herdon isn't Chevy Chase.
ReplyDeleteNo one is saying you should spend your cash, especially when sellers are asking prices way over assessment. But if you think you're going to buy this house or others in similar neighborhoods for 40% off assessment, then you simply won't be buying in those areas.
Philip - Regarding the trajectory I am tracking the sales that are recording in Albemarle county and using it as a barometer of what is going on. Right now many people are paying close attention to the assessment which is good news for the county which means that they will be thankful for another year of high assessments in order to prop up their houses if they go to sell.
ReplyDeleteRegarding the supply of 3000 sq ft or greater houses, there may not be a great supply but nor is there a great demand burning through people's wallets to get them.
Same - I plan to continually update the houses that sold. As I am not a Realtor I am not tied into the system showing pending sales. Although I have heard of pending sales being kicked out of escrow because the house won't appraise for the needs of the loan.
I agree there is value in location, but that only changes my land value in my model not the value for improvements. A $400K house built on a million dollar lot is still worth the same in regards to improvements had it been built on a $50K lot.
At risk of sounding repetitive I am not saying that the entire Albemarle market is overpriced by 40%... I am saying this house is.
I think everyone is clear that you think this house is 40% overpriced. I've only been arguing with you about this home, and about the segment of the market it represents.
ReplyDeleteYou don't really have any data measuring demand in this range of the market, or at least not demand adjusted to assessment prices. And I'm not sure why we should read lack of demand for prices over 20-30% of assessment as measuring demand at or under assessment.
Lastly, I'm not sure why location should be factored into your calculations solely in terms of land value. That might make things easier for you, but why should we think that location doesn't also affect the value of the home built on that land? Because labor costs are stable? Where is the evidence for that? and even if that were true, I'm not convinced that the market works this way, even under pre-bubble conditions.
It seems that the debate is only about the extent to which the market is overpriced, and not about the fact that it is overpriced.
ReplyDeleteIs there consensus that an adjustment and contraction to the housing market will come eventually? And if so, how long will it take?
Very interesting conversation. Scott, can I determine a house's assessed value from the listing sheet? If so, is it the tax amount with a multiplier? And if so, should it say specifically 2009 tax?
ReplyDeleteAlso, you say, "Regarding the supply of 3000 sq. ft or greater houses, there may not be a great supply but nor is there a great demand burning through people's wallets to get them."
Actually, I want a house of about 3000 sq. ft. There are way too many houses on the market that are bigger and more expensive than that. Buying activity has largely been among lower-priced properties. The big, expensive houses built during the boom are just sitting there. I suspect people will ask themselves what they should have before: "Do we really need a house that's 3500, 4000, 4500 sq. ft.?" Of course not.
one house wont decide a market or a 'hood. an old strategy in a down market is find 3 homes you like; make your offer on the 1st house, if not accepted, do not counter but go to house #2. repeat same if #2 is not accepted at house #3. go back to #1 and start all over again at a raised price. the comment from a buyer back to agent of " we have put an offer in on a different house, we will need to wait until we offer again on yours" is a powerful statement. it is difficult not to get emotional about a certain house, but those who dont will buy well if they are patient.
ReplyDeleteSame - Take a look at my post regarding the accuracy of the 2009 assessments. I used transactions that actually closed during the last 3 months and built a regression model to calculate pricing.
ReplyDeleteDemand to me is measured in closed transactions. You are correct that there could be a group of buyers out there that are willing and able to pay at higher prices, but since there is a plethora of houses available at an extreme price range I doubt that group makes up the majority of the buyer pool.
I can only measure what I see, and right now the best way to get a sampling of buyer sentiment is to look at what prices the houses closed at.
Your point about whether the value of the house is greater based upon the lot and should be considered a home improvement to me is difficult to objectively quantify. Yes a house is more enjoyable if it has fantastic views but that is true regardless of the type of house that you build on it. I am not doing that to make it easier for me, rather I am trying to compartmentalize the value so we can get closer to an apples to apples comparison.
Philip - If you are looking for the assessed value, many times it isn't on the listing sheet, because guess what? It's lower! :-) You can work backwards from the taxes if they are correctly entered but often I find it simpler to just go to gisweb.albemarle.com and find the true numbers.
The linear regression model I built was based upon the 2009 tax assessments and houses that closed within the last 3 months. They are all trending at or lower the 2009 assessment. I plan to update this at the very least on a monthly basis, and then eventually on a real time basis.
I also agree with you that many people do want a 3000 sq ft home, but they don't want to have to be that far in debt for the extra space. Life is stressful enough without having to worry about paying the bank everyday.
Enrique - Interesting strategy... have you used it successfully? I have also heard of buyers sending out simultaneous offers to similar properties and saying they will go with the one that accepts first. The only problem is that it only works if you are within your seller's trigger zone if not it can fall flat.
Sorry wrong link to tax assessment data:
ReplyDeletegisweb.albemarle.org
yes, did it on my current home in 95. had 3 final homes, started with #1 and made bid at about 95%. it was denied. bid on 2nd home and denied. seller of #1 came back and offered to take 1st offer at original price.
ReplyDeletegood news was bought the house for 190k in 96, a home a month before sold for 205k across street, basically the same house. bad news is my house appreciated to easily 525k in 2007, neighbor just sold for 400k, so we have taken a beating.
Scott, thanks for assessment link, plenty of great information there.
ReplyDeleteEnrique, thanks for your excellent suggestion on purahse offers.
I think this debate is probably getting tired, but there isn't a plethora of good quality homes (e.g., new construction or renovated) in this market (at least as I'm defining it -- which I think is consistent with how many others think of Cville and surrounding areas). And it's probably still too early in the season to get an accurate read on how much people are willing to pay in this range. There just isn't very much data yet. I won't be surprised if there are sales within 5-10% of 2009 assessments, but of course that won't represent anything close a majority of the pool of buyers. I'm not really sure what you meant by that, Scott, since it seems obvious that buyers who can afford this price are going to be in a small minority of the total pool of buyers. (Same goes for houses in this segment of the market: they are also in a small minority as compared to the entire market.) I assume you meant something else -- I just wasn't sure how to understand your comment. At any rate, the only issue is whether those buyers are willing to support prices that are higher than your expectations. My bet is that they are, and we'll just have to wait and see.
ReplyDeleteSame - By plethora I mean the following:
ReplyDeleteI asked CAAR to show me properties that were:
- Built on or after 2008
- Had 3,500 sq ft or greater
- 4+ bedrooms
- 3+ baths
- 2 acres or greater
- Albemarle County and Charlottesville
30 properties came up. This one being one of them with prices ranging from $475K (2009 built in Keswick) to $7.495M (You just gotta love Amy Toomy's sense of chutzpah on that one).
Lots of properties for buyers to go after if they are really that interested, but nobody is really chomping at the bit, because THERE IS NO URGENCY TO BUY!
Why?
If you are coming in from out of town, odds are you will be put up in a corporate apartment/house/hotel.
If you are looking to upgrade, your bet is that things are going to get much worse before it gets better.
If you are looking to sell you are just hoping nobody starts to break ranks and lower prices because it could all come tumbling down.
I am doing an upcoming piece on the Glenmore neighborhood, this time with more stats at a more granular detail. We can see what people think of that.
Scott,
ReplyDeleteYour Caar search is capturing houses in different markets. Some of the houses listed in Albemarle County are 20-30 minutes outside of Cville. If you restrict your search to houses within a 10 minute drive, how many are left? Maybe a dozen? Less?
If you're counting homes in Glenmore, Crozet, and Keswick, you're lumping together markets that ought to be analyzed separately. Caar doesn't make this search especially easy (though other sites do a better a job of this). But this is apples and oranges. Maybe I could find twice the house in Glenmore for the same money, but I still don't want the commute (brief as it might be compared to other areas/regions). And in expressing that preference, I'm certain that I'm not alone.
In short, you've allowed Caar to define the geographic market for you, and I think that's a mistake.
As for timing, you're generalizing here, and felt urgency will depend on the needs or preferences of any given buyer. You also think there's no demand out there that might generate support for higher prices, and, from my experience, that's simply false. But we've been around that block. So I'll wait for that data in this segment of the market.
Looking forward to your thoughts on Glenmore.
Same -
ReplyDeleteNow you want a comparison to only where this house is? Next I suppose it has to have the same build, shape, color, and contour in order to be comparable!
Commute is different for everyone. Somebody that works on one end of town may view it differently than somebody that works on another.
For example, lets assume that the person works at UVA. From Google maps the commute from this house is 23 minutes. From the $475.9K house in Keswick it is 20 minutes. For $400K difference I think somebody would be interested in driving an extra 3 minutes each way.
If you want something closer to your area try 3593 Garth Rd, MLS#463186 for $749K. Built in 2003 has a similar lot and finished sq ft. It hasn't exactly flown off the market either. And in this case the realtor knows how to use a camera and provides 41 photos of the property.
Can't wait to see all those mega sales you keep talking about that justifies your argument.
Great posts. I'm a late arrival, but I also toured the house in Beau Mont Farm. It's been on the market for many months, and was at $849k when we looked in the fall. The builder was talking about finishing in the bsmt, and perhaps he did so? House didn't seem as big as advertised, but the quality was very good. We balked because it seemed priced at the very top of the neighborhood (admittedly a nice area), and because of the possibility that this area would be redistricted for schools (out of Merr-Lewis). They dodged the bullet last time around. Also, I thought the realtor was the builder's wife? Finally, I could see this house selling for around $700k, but not $800k.
ReplyDeleteScott,
ReplyDeleteYour response is cute, but not much of an answer. How about you post a poll to see whether your readers -- bubbling over as they are -- think that houses in Glenmore, Keswick, and Crozet are substitutes for houses in Western Albermarle and Cville. You could use school districts to track those areas if you like.
I'm not saying that your assessment has to be neighborhood specific, but you're geographic market isn't paying attention to distinctions that many, if not most buyers, think are important (including, schools, as the most recent "anonymous" points out).
As for this particular house, I'm happy to compare it to 3593 Garth (which hasn't been on the market all that long). Since you haven't been in either house (but especially the one you're assessing here), it might help to point out just how large the Beau Mont house is. Of course you could look at the numbers: with 3875 finished sq. ft., but 2700 unfinished, there is 40% more house there. You can sneeze at that if you want, but, having been in that house, it's an impressive space that a family could expand into over time, and without the cost of new construction (since most of the basement is already framed for completion). Is the extra 2700 unfinished sq. ft. worth $80-100k? (Would the builder be willing to negotiate for completion?) I'll let your readers answer that for themselves.
Last point: I don't need mega sales to make my point. All I need to show is that houses in this part of the market are selling at or near (within 5-10%) of assessment. My claim was a fairly modest one, and it has been all along. You can try to reframe things if you like, but I'm not saying anything extreme here. The only extreme claim, so far as I can tell, is that the house listed above is worth approx. half of asking. Hardly anyone here agrees with you about that; certainly no one who has actually been in the house.
Same -
ReplyDeleteYou seem particularly obsessed with this house (strange for someone that supposedly has no connection this property) as compared to any other place.
I don't discount that it is a large house, but seriously how many people do you know need >> 6000 sq ft of living space? Charlottesville isn't home to the Bonfire of the Vanities!
Additionally you assume that people buying in non Western Albemarle schools are going to send their kids to public schools. There is a wide ranging demographic that would send them to Covenant or STAB. Some people buying in those areas don't have kids and don't care!
Once again I go back to basics as in regards to pricing something. If it takes a builder only $500K to build something why should anybody kick in an extra $375K? If you like the house so much I suggest you buy it. You can really prove me wrong and pay full price for it. For me personally I wouldn't make an offer for that house above $477K. I doubt it would be accepted this year. But who knows what next year is going to look like? But once again that is my opinion and if you like the house so much you can buy it.
Time will tell whether houses stay near assessments. I would argue that the only thing keeping houses at a higher value is because the assessments have been high. Since 2004 the assessments have sky rocketed and are over valued.
Eventually buyers are going to continue to offer LOWER and LOWER prices until a seller either RUNS OUT OF MONEY and goes into foreclosure, or accepts the offer which sets a new low.
But don't worry I am sure agents like you do an outstanding job of telling buyers that this is a great time to buy at these bargain prices. My advice to buyers is wait another 6 months... the prices will be lower.
Scott,
ReplyDeleteI'm starting to think Bubble Bloggers take this too personally. As I said before, I'm not an agent. I'm a first-time home buyer with a keen interest in this market. And I'm an avid reader of local blogs on real estate. I've got no particular interest in this house -- only in the methodology of bubble bloggers, who I think are probably over-stating their claims. Is it really so hard to believe that another buyer might disagree with you about the state of the market?
This house just happens to be a good example, partly because of the extremity of your claim, but also because I have been in the house, and thought seriously about it and some comparable homes in this area.
As I've said before, I'm not going to buy this house, or any house in the county. So I won't be proving anyone wrong on that front, but, again, it's not personal.
More generally, on the issue of making things personal, I find the attacks on real estate agents at the Bubble Blog rather counter-productive. I'm sure real estate agents read your blog and the Bubble Blog, and some of them rise to the more provocative claims made about their professional ethics (or lack thereof). When they weigh in, I think it's fair to argue with them. But I'm not sure about asking them to justify prices for specific homes. That's a sharp tactic (especially since their fiduciary responsibilities clearly constrain what they can say), and my guess is that it will drive them out of the comments.
Wouldn't it be better to include them in a more civil conversation, rather than hammer them with their own listings? I can see why frustrated buyers would enjoy doing that, but I'm not sure it's the most useful way of making the point -- which is that the market and assessments are over-priced. On that, we still agree.
Same -
ReplyDeleteIf you feel that you have been slighted by me then I apologize for that is not my intent. I am just trying to understand where you are coming from. You seem to embrace the non sequitur to the extreme:
For example you claim to be a first-time home buyer that is very interested in this market, but as you have just stated you don't plan to buy a house in this county... huh?
I will not apologize for criticizing realtors for doing stupid things:
- Lack of photos online
- Bad photos online
- Bad pricing
- Wacky claims of being under appraisal when it is most likely valued for less
- Claiming the sales are better, but not providing examples
- No price justification other than Cville is a recession proof market
- Talking head cheerleaders that are just trying to talk up the market
People have been brainwashed here for at least 4 years to believe that the market is just going up and up and up. And that interest rates are so low that we better take advantage of them now, because next month... err next quarter... err next year! they will be going up and up and up.
Combine that with builders pushing the same old lie that quality construction can only be had at $200/sq ft and I believe buyers have a right to be angry about it.
As far as your objection for me beating realtors with their own listings and price. Why shouldn't a realtor have to justify their price for the listing? If they can't explain how they got there then either they don't know what they are doing or they are being directed by the seller to sell at that price.
I have sold properties before and I was able to justify my price point with comps, and I told my listing agent to disclose that information to the potential buyers. What is so secret about that? And if it is seller directed pricing a realtor can always say that this is the price that the Seller thinks the property is worth. AKA they spent their profits before they got them. No violation of ethics there.
But there are a group of realtors and companies in this market that when you see their name on a listing you automatically know that the listing is going to be overpriced by at least 20% if not more. Worse yet these properties just sit on the market and languish. Look what happened in Northern Virginia, when prices came down substantially guess what happened? Properties sold! Maybe that idea will start to get around in Cville... maybe not! :-)
I do compliment some listings that I have found to be Worth a Look, but unfortunately still in this market there isn't much worth to look at... at least not at these price levels.
I don't need the listing agent to be a sounding board to my analysis. They are always welcome to provide their argument, but they should expect to be challenged on their assumptions.
I have received push back from other buyers who feel the property in their opinion may be worth more and I encourage them to leave their feedback as to why.
I am equally open to being challenged and I believe you have done a good job at that as well. You may feel that you have not convinced me, but that's fine because I don't feel I have convinced you either! :-)
I do hope this house sells, it would be interesting to see what it actually goes for!
Scott,
ReplyDeleteMy interests aren't supposed to be any mystery, let alone a non sequitur. I rented in the county for a couple years, and I've been watching the listings on Caar very carefully during that time. After seeing dozens of houses, I decided I preferred the idea of living in the city. But in making that decision, I tried my best to weigh the pros and cons of both options. So my interest in the county is partly residual. And of course, I'm still very interested in claims about the Cville/Albemarle bubble. As a buyer, it behooves me to do some thinking about where prices are and where they might be going. I'm not convinced that we'll see a 40% drop (for this house or others in this part of the market), but I've learned a lot in the process of trying to explain and justify my reactions to your claim. That's partly selfish! But, as you say above, it's good for people to give their reasons.
I think you're perfectly entitled to criticize realtors in all the ways you suggest above. I've no problem with that -- in fact, I think it's a public service you're doing. My comment was mainly a reaction to a current thread on the Bubble Blog (and so I should probably have posted it there -- apologies). I just think that it's one thing to criticize realtors for bad practices, but it's something else to demand that a named realtor justify specific listings to the universal public. Since I'm not an agent, I don't know exactly what the scope of their fiduciary obligations are. But I can imagine not being comfortable saying some of things you suggest above about why my clients set their price.
Although I can see the appeal of pressing realtors for their pricing strategies (specific to particular listings), if this happens every time a realtor says anything on the blog, the predictable result will be to drive them from the comments (or to make them anonymous). If that's what the Bubble Bloggers want, then they'll have made their point. But I'd prefer to have some realtors openly engaged in the comments. I think we would probably learn more that way.
Same -
ReplyDeleteAs always I appreciate your feedback.
I seriously don't think most realtors are going to post on this board under their name regardless of the tone. They would more likely just try to come on as a concerned buyer to talk up the price... :-)
Part of the problem in the prices raising is as I pointed out in my article of "How Prices Compound", the transaction fees and overpayment and possibly over refinancing can cause the seller to need to sell the house at a higher price point. That doesn't mean the neighborhood went up just that the property in particular has too many transaction costs.
I believe there is some serious price gauging still going on in the market. Hitting closer to home for you we have been discussing 302 11th St on the Bubble Blog. Ray Cadell bought it in Foreclosure for $45K and it is assessed at $119K he is trying to sell it at $189K. I think there is room for the price to drop by at least 40%.
Not all markets will drop, some areas will retain their values longer. The Rocks (AKA The Docs) is made up of homes with mostly affluent doctors that can weather the bad economy. There are several overpriced homes in those markets, but my guess is that the doctors can afford the carry.
The service that the Bubble Blog provides is a good one. They tackle a wider segment of the market than I do. I just hone in on specific properties and try to demonstrate what I think is unfair or selfish with examples of how I got to the pricing. I also try to highlight good deals too, but they are harder to find than bad ones.
As always I state that this is my opinion and I don't think I represent the magic number that the seller will sell at, but I do believe I try to provide a barometer for the buyer.
I think it is very cowardly that a realtor can't publicly justify their prices. They publicly promote them on CAAR so they should have the ability to justify their price.
If you want to see a good example of how a realtor professionally handles my criticism of their pricing look at Jim Duncan over at realcentralva.com. When I was dissecting one of his companies listings he was clear to make his justifications, but he also threw in the caveat that basically the seller has the right to price it where they wish.
I believe Jim's blog provides a good service as well, although I tend to think that he has a rosier view of the market than I do... but that's his job! :-)
I think you're right that you're unlikely to get realtors responding to your claims about specific listings. I don't even think they'll do it anonymously. (And if I were the agent for this house, at least I'd post some professional photos!) But I do think realtors would participate in a more general blog, like Jim Duncan's, or even the Bubble Blog. And it's interesting to hear how they defend their practices, even if not with respect to specifics. In any event, all of this is better than the situation a few years ago, when we were all more or less in the dark.
ReplyDeleteI viewed this home...realtor is the builder's wife....not sure why interior pictures are not shown on CAAR...not the right home for me, but definitely quality contruction...very nice inside even at the high asking price. The major issue for me is that the asking price is so out of line for the community as a whole. I thoroughly analyzed assessment and sale prices for the entire community....anyone paying even close to asking price will be underwater for some time to come!
ReplyDeleteso anon at 7:12, what would you pay for it? that is the 800k question?
ReplyDeletei was there also, very nice place. i would put it around 575-590k.
Enrique-
ReplyDeleteI'd pay maybe $650K if the basement is in fact finished.
Like "anonymous," I also studied the assessment and sales prices for the rest of the community. $875k is high, but a price at 90% of asking (which is reasonable in this market) would be comparable to other homes that are similar in size and quality to this one. There would also be more than a half dozen more expensive properties in that community. So the price isn't out of line, except for buyers who think the skies are falling. It could happen, but I'd be surprised to see this house sell for much under $750k.
ReplyDeleteAlso, maybe anonymous could point to some newly renovated or new construction homes that meet the following criteria: (1) location within 15 minutes of Cville, (2) 6500 finished sq. ft., (3) 1+ acre lot, (4) selling for under $700k.
It would be nice for buyers, but this market isn't even close to that happening.
same said,
ReplyDeleteEnrique asked me what "I" would pay for it. He didn't ask me what I thought it would sell for.
That's fine -- but then my point is that you don't have a realistic sense of the value of the property.
ReplyDeleteSame - Still out there promoting this thing huh??? I hope the builder gives you a commission. :-)
ReplyDeletePlaying along with you, using your logic of 90% discount should be off of assessed price ($832K), not "pie in the sky make up any number I want" price. Which would take it to $750K.
Ag is already setting the high bid for $700K, where I am setting the floor at $477K. Looks like Enrique is in between.
Of course you would buy this house for $875K if you didn't just love the city so much...
Same, you say: "Also, maybe anonymous could point to some newly renovated or new construction homes that meet the following criteria: (1) location within 15 minutes of Cville, (2) 6500 finished sq. ft., (3) 1+ acre lot, (4) selling for under $700k."
ReplyDeleteTrouble is, the listing for the wildly overpriced house for $875K clearly states 3875 sf ft. finished/2700 sq. ft UNFINISHED.
Scott -- no need to distort my claims, which have been fairly consistent above. I never said I'd pay $875k for this property. I certainly wouldn't have. But I think the market will bear something in the range of $750k, and perhaps somewhat higher. And if the seller's agent wants to pay me a commission, I'd be happy to shed my anonymity to the agent!
ReplyDeletePhilip -- there's no trouble for that house, which is overpriced, but not wildly so. I used 6500 finished sq. ft. in the comment above to point out that the numbers thrown out by Enrique and Anonymous are ridiculous. Anonymous said he would pay $650k if the basement was finished, which would mean that the house had 6500 finished sq ft. (I suppose this tracks Scott's claim that houses in this region are only worth $100/sq. ft., pretty much regardless of location or quality of construction -- since those aren't objective measures, and since anyone who uses them must be emotional or irrational; two can play the distortion game!) Anyway, if you can find that deal, then you should take it. But you won't find it. As I said above, this market is no where near those numbers.
If you use the same criteria mentioned above, with 3875 sq. ft. finished/2700 sq. ft. unfinished, you're still not going to find much out there below approx. $750k, at least not at this level of quality and location. But at least with those numbers, there is some inventory and competition.
Same, you say: "If you use the same criteria mentioned above, with 3875 sq. ft. finished/2700 sq. ft. unfinished, you're still not going to find much out there below approx. $750k, at least not at this level of quality and location."
ReplyDeleteGood point. From what I can tell, you are absolutely right. I would just add that it's the bigger, more expensive houses that are sitting on the market. In this economy, people increasingly realize they don't need such a big house. So my guess is that the $/sq. ft. numbers on them will have to come down. And maybe $750k would do it.
Same -
ReplyDeleteSorry, you just seem so in love with this house I thought I would at least put you at the high end... ;-)
I look at land value separately from improvements value. So yes you can build a 3,500 sq ft house on top of a garabage dump and I will most likely value the improvements at $350,000 for improvements and close to $0 if not negative for land value. Same way here that if the house is in a good neighborhood the land value has more value to it than the garbage dump hence a higher land value number.
I think comparisons made where they just divide the sales price by the finished sq ft, or sales price by the size of the lot to be deceptive. You can't use those numbers to compare things fairly.
Just because there aren't a lot of other houses on the market like this one that it doesn't mean that it is worth $750K. They could be priced at $550K and could say the same thing.
I would argue that the fact that this house is still listed and not moving is evidence enough that it isn't priced right, or that buyers aren't willing to bet that it is anywhere close.
Scott - in fact, I don't love this house; I just like a good argument. At this point, if I were looking in the county (and I'm not), I'd be more interested in other homes (maybe you should scout for other really bad deals!). But, as I've said repeatedly, I agree that this particular home is overpriced. If the seller isn't flexible, or willing to consider offers at 90% of asking (or perhaps, as you suggested above, assessment), then I wouldn't expect it to move. It'll be interesting to see what happens.
ReplyDeletePhillip - you might be right about people not preferring such big houses in a down economy. Reading the numbers Jim Duncan posted today, there were some sales of large homes in Q1 2009, but there is obviously a lot of inventory still out there.
Maybe y'all should be looking at what prices the houses on Beau Mont Farm Road have been going for lately. This is a very desirable location.
ReplyDelete