(Kenneth K. Lam / The Baltimore…)
Jason Berkowitz thought he and his family would be couch surfing for an indefinite period thanks to a problem that might seem bizarre this far removed from the housing bubble: They found a buyer for their Lutherville-Timonium townhouse within days, but not a suitable home to buy themselves.
He's relieved to report that it all worked out. His family closed on a home in Phoenix (also in Baltimore County) last week.
If you've been following his saga, it's the home he made a "Hail Mary" offer on that was initially rejected. Asking price: $515,000. Original offer: $465,000 -- which he said wasn't intended as a lowball give-me-a-steal.
"We offered what we felt was fair based on comps, and the sellers kindly advised us to find sand and start pounding," Berkowitz recounted in an email to me. "But then a miracle happened – another home about the same size, very close nearby, in move-in condition with nearly as much land which had originally listed at 575k last summer sold for 485k."
The house he'd offered on was not at all in move-in condition. With this new sale figure in hand, he tried again.
"We went under contract at 477k, and that must have been hard for the sellers, but the reality was there was not a single other offer they'd received ... since re-listing," he said. (Original listing price: $550,000.) "Had it not been for that nearby sale, I'm pretty sure I'd be telling you now about a comfortable couch at my in-law's home."
The price the sellers ultimately agreed to? "$1,000 less than they paid for it 10 years ago."
So that's the end of the story, more or less. But how he and wife Bethany got there is a fascinating (and frustrating) window into the housing market. I'm turning that part of the story over to him:
Taking both transactions at face value, a reasonable person would assume the real estate market is mending – we sold a home in days and we found a home which offers good value (at the expense of costly updates and repairs) so we were also able to take advantage of weakness which still remains in the Baltimore market.
But when you peel the onion, and reflecting on the details of our experience, I cannot stress enough how dysfunctional the RE market presently is, at least here in Baltimore. ...
First, as we’ve talked about, it’s very much have and have nots. Being in a community of townhomes with a fluid market and available inventory we really observed this in detail. It took 3 days to get a contract and 3 more days to agree on terms, and it surprised us and I suspect quite a few buyers. Several (either 3 or 4, I don’t remember offhand) updated homes in my community listed shortly after ours, and they sold increasingly fast and we started to see bidding wars. Our neighbors’ buyers canceled a vacation to put in an offer because they were outbid on another home.
Despite that – other homes which were priced fairly considering the cost of renovations to bring them on par just sat around. Last I checked, they’re still on the market.
So there are obvious implications to sellers, like making sure your home presents well, make a few investments in improving the condition and pricing aggressively. The less obvious and more important data point I walked away from is a fear people are leveraging up again at pre-2007 levels. Otherwise, if one home is priced at 375k but is move in ready, while another identical home is priced at 325k but needs a moderate amount of updating, why wouldn’t anyone buy the 325k home and make the investment? And while realtors or RE market analysts would point out interest rates being sufficiently low it makes financing a more expensive home appealing, it doesn’t change the fact the other home is significantly less expensive and the remodel costs would be less than the updated home.
The most frustrating part of selling is agents and buyers aren’t aligned to market conditions. EG – our townhouse is in excellent condition. Despite an extremely clean inspection report, it didn’t stop our buyers from giving us an ultimatum with a threat to walk from the contract unless we made every repair in the report, even though they were as basic as replacing outlet covers and furnace filters. The same thing happened to our neighbors too. When my agent informed me of the ultimatum, all we could think is “are they for real?” They were willing to risk losing the opportunity to buy, and seemed oblivious to the fact this isn’t 2009 and for certain properties, there is more demand than supply. Other buyers were coming by regularly after we were under contract, ringing our doorbell, asking [us] to let them know if the contract fell through, offering to beat the buyer’s offer.
Now for buying, this was a different pain.