A Marginal Listing, A Decent Rental

Posted by Dave Fratello on Friday, October 19th, 2007 at 4:16am.

Here's the situation: It's Spring. You've got a home 2 blocks from the beach. You're ready to sell. You sign up one of the big-name local agents. You're on the market by early May. It's only a matter of time before you're in escrow, right?

Alas, this scenario hasn't played out as expected for the sellers of 117 Highland Ave., a South End remodel with 3br/2ba and 1500 sq. ft. (Click address for details.)

Now, after six months on the market, the house is for rent (for $4,500/mo.). Oh, it's still for sale, too, though the sign is down. If you're inclined to rent the house, the phone number you'll dial is actually for the listing agent.

The misfortunes of 117 Highland parallel those of a new home at the opposite corner of our region (west of Sepulveda), 2709 Oak, discussed here yesterday.

We know why buyers haven't leapt at the chance to purchase 117 Highland:
  • it's smallish;
  • it was remodeled, but not recently;
  • it's on a half lot, no yard, on a somewhat busy street (Highland isn't as bad down south);
  • one bedroom is impossibly small and another is tight, too;
  • the upstairs living space, while it kinda works, is strangely chopped diagonally; and
  • curb appeal is limited – in fact, the home probably needs an extensive remodel.
Most of those problems could be overcome with a change in price. But Highland hasn't moved much. It began at $1.449m, and slid slowly down to $1.365m ($920/sq. ft.).

The owners paid less than $1m, when the property address was 223 1st Pl., 4 years ago ($929k/Nov. '03). Without looking up the loans (i.e., a HELOC scan), we can assume they have some room to negotiate, but that the sellers have simply preferred not to "give the house away."

A few months ago, the owners moved out, and the property was very nicely spruced up and staged afterward. (An art that is becoming vital in this market.) And of course the property has been re-listed a few times to hide the history. (Current "DOM" = 37, CDOM: 170.)

But none of those tactics worked. In the end, Highland is a marginal property, and marginal listings are in trouble all over – signs of inflated prices and a pickier buyer pool.

Just like with the new home on Oak, potential renters win in this story. You get a decent home without the albatross of owning a depreciating asset that would be tough to unload in almost any market – that difficulty only now becoming apparent.
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