According to Kiplinger’s, sellers are in rough waters, right now.
Their best example? The poor sap in this story who couldn’t sell his Boston condo, for three and a half months (can you imagine it???), this past year.
Passengers on the Poseidon aren’t the only people in distress this summer. Condo owners, who had been cruising along propelled by double-digit price gains, are encountering cooler currents and the prospect of perilous waters ahead.
In Boston and other markets, real estate agents say the market for lower-priced condos (under about $400,000) is still relatively tight and demand is strong. But at the high end, the bidding wars are over and thereâ€™s more give-and-take between buyers and sellers.
Andrew Terrat found the market cooling when he listed his luxury condo in Boston’s South End for sale last October.
He bought his current apartment in 2004 for more than $900,000 and listed it for $1.4 million in October.
Buyers showed little interest, so Terrat took it off the market and used the time to transform a home office into a guest bedroom. In February, he put it back on the market; instead of reducing the price, he threw in his Bang & Olufsen audio system. By May, he’d found a buyer.
That’s right folks. Things are tough out there, if you’re a seller. If you bought a million dollar home, two years’ ago, you’ll only be able to count on a 63% return on your investment, if you try to sell it, today. **
** Here’s how I came up with the 63% return, using publicly available information. The story says the seller, Andrew Terrat, bought his place for somewhere in the $900,000 range. A commenter, below, says that it cost him $907,500 (hi, nosey reader). Let’s assume Terrat put in another $100,000 in renovations, to outfit the unit, and to make the den into a bedroom.
The article says his property was listed for sale for $1.4 million (MLS shows it was on the market, earlier this year, for $1,395,000). But, let’s assume Terrat had to settle for a lot less – that he found someone to buy his condo for, at a minimum, $1,250,000 (the sale hasn’t closed, yet, so we can’t say, for sure, but it went under agreement after only a month and a half, the second time he put it on the market, so we should assume it was close to the asking price).
Terrat is paying a 5% real estate agent commission, so he’ll ending up with $1,187,500.
His total cost was $1,007,500.
Therefore, he’ll personally net, conservatively, $180,000 on the deal. (That’s tax-free, mind you.)
Let’s assume he put down 20%, when he bought, or a total of $181,500. Add in the $100,000 in renovations he made, and his total investment has been $281,500.
He invested $281,500, and now he’s making $180,000, on the sale, two years’ later.
Poseidon? It’s more like being on the Queen Mary 2.
*** (Just so you are clear, I’m being sarcastic. Obviously, making such a huge profit shows that this guy is not an example of a “bust”. Quite the opposite.) ***
Source: Goodbye Condo Mania – By Pat Mertz Esswein, Kiplinger’s