Renting Could Cost You $300k

By Dave Fratello | November 21st, 2008
There remain lots of listings simultaneously for sale and for rent. (See our mid-September update, "Why Sell When You Can Rent?" Many are still available.)

The problem for a seller is: What happens if you succeed in finding a renter, not a buyer, and then need to bring the property back to market later?

2909 Elm offers a cautionary example. (Click for more pics & details via Redfin.)

This 5br/4ba, 3450 sq. ft. home (built 1991) was first offered 2 years ago – Dec. 2006 – at a price that was much too ambitious. (More on that in a moment.)

Over time the price came down, but never quite to market. The home rented out, instead, in July 2007.

Now it's back, much lighter than its last list price.

The price progression:
  • Dec. 2006: $2.8m
  • Spring 2007: $2.495m
  • June 2007: $2.395m
  • July 2007: $2.025m
  • late July 2007: rented
  • Today's price: $1.699m
Yes, that's a $1.1m fall from the absurd start price in late 2006.

Most significantly, this is a drop of $325k (-16%) from the sorta-close-to-market-price of Summer 2007 to the new reality of late 2008. In other words, by renting in 2007, the sellers were forced to come back to market more than $300k lower than before.

Need we also point out that this is a dreadful time of year to begin a listing? Renters can force awful timing on you when they leave on their own schedule.

The new price, by the way, isn't bad.

At a bit less than $500/PSF, 2909 Elm is at the lower end among recent sales in the Trees. For instance, comparably sized 3104 Palm (4br/3ba, 3425 sq. ft.) sold in July for $1.710m, and $499/PSF.

Out of 6 listings in the same general price range ($1.749m-$1.825m), 3 that stand out (2600 Poinsettia, 3011 Valley and 3314 Laurel) all have a PPSF just a tick or two above $500.

So, this time around, the sellers appear to mean business, but they do have a high hill to climb with the market as it stands. Had they been offered a low-ball last year and taken it, no doubt they'd be better off today.

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