Close the Books on 2603 Palm

Posted by Dave Fratello on Tuesday, May 18th, 2010 at 4:21am.

One of the surprises of the early part of 2010 was a quick deal at 2603 Palm (4br/4ba, 4725 sq. ft.).

The listing debuted at $3.0m before the Super Bowl – in mid-January. It's on Valley.

How many buyers were out there at that price point, willing to overlook a location issue?

You only need one, and that buyer knocked 3 weeks into the listing.

We've heard the buyers were coming from their own nice Tree Section house on a busy street, so that's one way to be the kind of buyer that could overlook Valley.

In the end, though, it's no mystery why 2603 Palm drew such interest.

It's a newer (2006), beachy Craftsman-inspired home ("Tropical Plantation," they called it) on a double lot. The big (for the Trees), sunny back yard has a stylish pool and spa that the outgoing owners put in. The spacious interior also got plenty of upgrades courtesy of the first owners. (The MLS listing has gone dark, but this virtual tour on YouTube has the listing pics set to music – 2:20 well spent.)

2603 Palm has now closed for $2.925m, just a bit below asking. (See more on this price below.)

The house is great, but the outgoing owners had to leave something behind. Having paid $3.4m new in Sept. 2006 before adding value with the pool and upgrades, they didn't get out whole. You can easily see a loss of $500k or more from selling 4 years after acquiring the home at the local market peak.

Palm was another unique property developed late in the bubble years by a well-known local builder who has gone experimental at times. An interesting, roughly comparable home he produced, known as "The Farmhouse" at 570 27th (5br/4ba, 4100 sq. ft.), sold after 15 months on market in June 2008 for $2.680m, far below its start near $3.9m. (See MBC's "Bought: The Farm(house)" for more.)

Back to Palm – that closed sale price of $2.925m includes something of a discount for the fact that the listing agent also represented the buyer. The sellers could afford to take a lower purchase price because they were paying out less at close of escrow.
If that "dual agency discount" was 1%, for instance, the sellers could have taken about $30,000 less on the purchase price and netted out the same. So you could view the "real" final value – on a full-commission sale – as closer to $2.950m. (An assumption we're happy to make, for reasons described below.)

Now, there's an interesting little backstory involving MBC.

MBC is asked for suggestions and advice all the time, and if your blog author doesn't feel competent to answer, we'll ask around to collect the best information. (We do agent referrals, too, in case you didn't know.)

In the case of 2603 Palm, the homeowner – a longtime MBC reader – asked for a frank and unvarnished opinion last Fall as to the potential resale value of the home.

We gave 3 answers, of which 2 now look pretty good. (The homeowner gave permission to tell the story and quote from MBC's emails.) The answers:
  • First estimate: $2.950m, based on the roughest measure – recent resales of other homes last acquired at about the same time (2006).
  • Second remark: "I think you'd be advised to start below $3m, probably 2.8-2.9." (The listing started at $3.0m.)
  • Conclusion: You "might have trouble finding a deal above 2.7."
Yes, it looks like the less your blog author thought about it, the better the estimates!

Bottom line: The sellers priced it right, got it exposed well enough and made a quick deal, despite the potential headwinds they faced with a higher-priced property on a busy street. A special property will help you overcome some of those other issues.
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