Here's an REO in Laguna Niguel that is likely going to incite a bidding war. Check out how far below the previous sale price it is...
28801 Charreadas, 92677
Asking price: $589,000
Asking price/ sq ft: $300
Income requirement: $147,250
Borrower purchase price: $910,000
Borrower purchase date: 8/22/06
Size: 4 beds, 3 baths, 1,965 sq ft (built in 1985)
MLS: S531303 (1 day on Redfin)
Zillow Zestimate: $736,500
2007 property tax: $5,961
HOA dues: $54
Type: Single Family Residence
Style: Spanish
Stories: 2 Levels
Lot size: 9,800 sq ft
From listing: !!!!!Attention Buyers and Agents!!!!! Act Fast on this Bank Owned home centrally located in Laguna Niguel. Priced right to sell, this incredible home is 100% Bank owned and ready for immediate occupancy. No more hassling with short sales......Get your unbeatable deal today!!! This home is on an interior street backing to beautiful hills and nature. Unparralelled privacy, lot size and views at this price! Dynamic and spacious floorplan offers plenty of living for the needs of your growing family. Location offers the convenience to be just minutes away from top notch shopping, award winning schools, Freeways, tollroad access, fine dining and entertainment. Bring your best offer today because a house with this much to offer at this bargain price will not last!!!!
OK, so the interior isn't perfect, but it is very colorful. Whomever buys this will be fine as long as they bring a few cans of paint.
Where does this stand in terms of rental parity? Glad you asked...28641 Charreadas is for rent asking $2,950 per month, and these two are fairly identical in terms of size. That would place a value of $472,000 on our subject property for an owner-occupant, if we assume a GRM of 160. So, by historical standards, the property is a bit overpriced at $589,000 because it is not supported by current rental rates.
Coincidentally, 28641 Charreadas is also for sale - for $750,000. That would put the asking price at a GRM of 254 - severely overpriced considering your monthly cost of ownership would be somewhere around $4,800, if you bought and put 20% down.
We wonder whether a prospective buyer would want to fight for the chance to buy our subject property, or whether they would prefer to go for 26002 Campeon, a bit bigger move-in-ready property a block over that is asking $649,900. But, this property is a short sale so there is likely a bigger hassle involved.
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Assuming a sale for the full asking price, our subject property/comp-in-the-making will record a decline of $321,000 from the peak, not including any sales costs. It would also represent a depreciation of 35% off the 2006 price.
Monday, May 05, 2008
File this under "priced to sell"
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5 comments:
I'm pretty sure that these homes are above the Mercedes Benz Laguna Niguel dealership near the 73 Toll road bridge and 5 frwy noise. Not interested in buying in this undesirable area especially not with prices falling quickly. Why settle for hamburger when I can have filet mignion later. Also, there are a few streets in this area missing homes that were never built during the last real estate downturn which only adds to the undesirability factor.
Who wants to live on a steep hill like that? I wouldn't. Don't let your kids go rollerblading around there.
It's stil a lot of money for a simple little house. The market is still going to fall a lot more before people will get back in.
Can you explain what you mean by rental parity and when you use the GRM?
GRM stands for gross rent multiplier, and it is a rough way to valuate properties based on their rental value - the lower the GRM, the better for the buyer. A GRM of 160 that I use for an owner-occupant means that as a goal the prospective owner would want to purchase the property for about 160 times what it would cost per month to rent the same or a comparable property. The GRM an investor would look for is even lower (usually around 120), because they want to rent the property out for less than their monthly expenses and be cashflow positive.
A GRM of 160 would roughly achieve rental parity, meaning the property would cost you roughly the same each month to rent as it would to own with a sizable (standard) downpayment. Do not be fooled by people who say otherwise: This was the standard before the bubble (except during the late 80s runup, but it came back in the mid 90s), and I believe it will return again because it is not a good financial decision to pay *significantly* more to own a property than rent unless you are expecting appreciation to kick in and make up the difference when you sell.
In an environment like we have now with prices falling, obviously, this is not the case.
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