Homes come up for sale in clusters. We already reviewed one home on Stanley a few weeks ago- also a double wide that was in such poor condition it could not be rehabilitated. This one is almost the same, except it has no garage, the yard is larger, but the neighborhood is a bit less desirable. The one on Stanley was listed for $250,000 and is currently listed for $225,000. This one starts out at $219,000, but I think it will end up under $200,000.
That being said, the seller can carry, maybe with as little at $30,000 down… Would that work for anyone? Maybe.
I go out and walk land to get take the temperature of the market regarding spec builders and what is possible for development. These properties have been listed on and off for a couple of years, but I hadn’t actually gone out to walk them, in part because I generally focus on Alta Sierra and Penn Valley. Most inexpensive lots in Grass Valley are inexpensive because they are unbuildable, and when they don’t sell after a year or more, I assume they have some challenge that makes them unworkable for development.
These two lots do have a couple of challenges. There is a seasonal water course that that cuts across both lots that begins just a 100 feet from the access point. It would be unadvisable and expensive to build in a water course, even if it is dry during the summer. Extensive logging has left both properties denuded of the big trees that once drank up all the water, and now there is some evidence of an erosion problem developing at the top of the draw. You take out all the big trees, and the ground starts to move. Between the steepness of the slope and the potential for unstable soil, most buyers will pass, and I can see why these properties have not sold.
Is this a nonstarter? I don’t think so. When buying land you have to ask the right questions and you have to be willing to consult experts. Before passing judgement on the viability of development an engineer with both soil and hydrological expertise would need to take a look at the property with a clear and precise property line flagging that would allow for exact determination of the necessary setbacks and specific determination of the building envelope. It looks to me like there might be one, possibly two reasonable building sites. What is the relationship to the probable building sites to the property boundaries and cost and feasibility of developing the driveways accesses? Are both lots equally developable, or is one of the two lots clearly superior to the other? And finally, would it better to combine the lots, and straddle the property boundary between the two lots for the best development potential?
These are not questions the seller or realtors can answer except in most general terms. Only an engineer or site planner can give accurate information regarding these critical questions. It might cost $3000 to $5000 to get a detailed report that would determine the development costs of these properties.
Cheap property almost always requires expert evaluation. You might spend that $3000 to $5000 to find out that this property is not viable for development. Would that have been a waste of money? If you are thinking you would not want to spend money on professional guidance in the inspection period before the close of escrow, I want to suggest an alternative approach. Money spent on inspections and reports can be a huge asset for you as the new owner. You know exactly what you are buying and have a good idea what the development costs will be once you take possession and start to put in your infrastructure.
Here’s my question: How is the contractor going to make money on this home? I saw this home last year, it sold in March of 2017 for $270,000. It was dated, but clean, and I thought at the time it was fair priced. A contractor bought it, put in a new kitchen, new flooring, painted it, put in new bathroom vanities and fixtures, and now has it back on the market for $310,000. Not much margin in that fix and flip! If this contractor makes money on this home I want him to come work for me! This is a very nice home, and I think it is priced just about right for the market. If you have been watching the Market Report all spring you know a 3/2 in Wildwood on flat lot in this condition would sell for $325,000. The discount for the driveway should be just about right, and I expect this one will sell. Again, I am always watching how the details of the home’s topographic lay out and the way small differences in the floor plan impact consumer sentiment in terms of the time it takes to sell a home and the price sellers get for their offering. We have seen lots of 3 bedroom and 2 bathroom homes in very good condition. What makes them each a little unique is the driveway, parking, and yard. With a steep driveway the discount to the premium is exactly equal to the value consumers place on a flat lot. I will be watching this one and comparing it to the sales price of homes in similar condition that have flat driveways.
Sometimes an usual architectural feature can reveal hidden value, but this home is not one of those. The is a bathroom on every floor, so that intrigued me, but the upper floor bedroom has no wall between it and the open cathedral ceilings in the main floor living room. Anyone trying to sleep upstairs would hear and see everything happening on the main floor. The kitchen reflects that “I hate to cook” mentality of the 1970’s with a narrow cooking and prep area that is away from the main living room. These galley style kitchens are the bane of the era. You can’t fix them because in this case there is no way to open it up to the rest of the house. Down stairs, just one bedroom and one bathroom, so it is not really a separate sweet, just a set of stairs up and down between the sleeping quarters and the rest of the house.
We have seen a lot of homes in the $300,000 to $325,000 price range in Wildwood. A ranch floor plan on a flat lot is a much better value, and we have seen several of those for this same price tag. It will be interesting to see what this one sells for. Functional obsolescence can’t be determined from the MLS stats. You have to go and look at the house and ask yourself, how would the space be used? In this house, the answer is, “not well” Does that mean no one will buy it? No, what it means is the seller will have to discount the home to point where buyer resistance to the floor plan is overcome by the discount in the price. That number, that exact “discount” is comparable with other functionally obsolete floor plans, and combined with the stats from the sale of other homes in the neighborhood a complete picture of buyer preferences and the premium buyers are willing to pay for the most desirable floor plans can be ascertained.
The home is set very far off the street. It has many upgrades, including granite counter is the kitchen and bathroom, upgraded floor covers, and there is a golf-cart garage as well as a 2 car attached. This home is a great value at $249,000. So much so that I expect there will be multiple offers. The seller has turned this into an auction, which will give a very interesting measure of market straight right now. Looking forward to see what happens with this one.
Big house in need of work.
I was told there were multiple offers for this modest bungalow. Not the greatest house, located in a neighborhood where one end of the street is considered highly desirable, and the other end is considered undesirable, this home is in the middle of the block. Listed for $299,000- that’s $380 per square foot. Nothing in this home would seem to indicate that high of a price tag. What’s happening?
Inventory is really tight right now.
Interest rates are rising, and buyers may be panicking that they will be unable to afford the mortgage in the future.
But I don’t think these two factors alone can explain why the sudden rise in prices on the least expensive homes. There seems to be another factor.
For the last couple of years the low end of the real estate market has been defined by sellers flipping homes they bought in the great recession years between 2009 and 2012. People who bought in those years did not sell immediately after the market started to rise in 2013. Some sold in 2013, but more sold in 2014 and every year since thereafter there were homes being sold that were purchase in the down years. This year, that inventory seems to be fairly fully exhausted, and there are no more homes, bought in 2009 or 2010 that are now being flipped. The result, is- sellers today paid more for the homes they are selling than the homes that have been sold in the last few years and so base prices are rising, and seller equity is dropping. Sellers feel confident and comfortable squeezing the extra money out of the home they are selling precisely because they paid more for it to begin with. That is actually a sign of a normal market, and it might just be an indication of the long term trend in pricing.
I do not frequently look at vacant land, but I see so many houses in the Lake Wildwood subdivision it makes sense to go out and look at the underlying land prices and see what can be learned from looking over available property for building. Both these lots are listed under $30,000 and I drive past each of them several time per week, but I have never stopped to look, so yesterday I took my camera with me, shot some video and have produced it here for the Corner Office.
Back in January I did a similar search for vacant lots in Alta Sierra and found pretty much the same pattern. Lots priced under $50,000 are almost universally difficult to build, expensive to engineer, and have typically been for sale for a year or more. There is no shortage of inexpensive property that would be very expensive to build out, require extensive dirt work to get in a driveway, and would result in steep slope foundation along with all the disadvantages therein.
Buyer preference now strongly leans towards ranch style homes on flat lots. In every price range and over a wide range of conditions two-story homes are discounted to the premium when it comes to the sales price, as buyers demonstrate with their pocket books that a single story home with a flat driveway is the most desired of all floor plans and types. The lack of buyers for lots like these reflects the expectations of spec home builders that after they will not be able to recover the additional cost of design and engineering because the final product, a two story house on a steep lot simply is not what buyers want.
This 1986 stucco home has pleasant lines and is well maintained, has a nice yard, and is move in ready. It has not been fully updated, and the tile, appliances and fixtures are all 30 years old, but the house shows nicely. It’s 1538 square feet, and has a decent size kitchen. You can’t buy this home anywhere near $350,000 except in Wildwood, and based on other homes we have seen with ranch floor plans and similar condition that sell for $325,000 the split level discount seems fair. I think this one will sell quickly.
Manufactured homes are a hot commodity right now. Spec builders are putting them up and homes less than ten years old are selling at prices that have narrowed the gap between to stick built homes and manufactured home. The lack of stick built home inventory means buyers don’t have much choice. A year ago a manufactured home in the condition and with the features and amenities of this home and in this neighborhood, would have been priced $50,000 under what a stick built home in the same condition would have sold for. In today’s market that difference has narrowed to about $30,000. The calculus is changing for the differential in pricing between manufactured and stick built homes.
We have to keep watching it to see what happens next.